10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

For the fiscal year ended December 31, 2002
OR

[  ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________
Commission file number 1-8323

CIGNA Corporation
(Exact name of registrant as specified in its charter)

Delaware	06-1059331
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
One Liberty Place, Philadelphia, Pennsylvania	19192
(Address of principal executive offices)	(Zip code)
Registrant's telephone number, including area code (215) 761-1000
Securities registered pursuant to section 12(b) of the Act:
Title of each class	Name of each exchange on which registered
Common Stock, Par Value $0.25;	New York Stock Exchange, Inc.
Preferred Stock	Pacific Exchange, Inc.
Purchase Rights	Philadelphia Stock Exchange, Inc.
Securities registered pursuant to section 12(g) of the Act:
None

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X  No   

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X  No   

        The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2002, was approximately $13.3 billion.

        As of January 31, 2003, 139,593,057 shares of the registrant’s Common Stock were outstanding.

        Parts I and II of this Form 10-K incorporate by reference information from the registrant’s annual report to shareholders for the year ended December 31, 2002. Part III of this Form 10-K incorporates by reference information from the registrant’s proxy statement to be dated on or about March 21, 2003.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business
	A.   Description of Business	3
	B.   Financial Information about Industry Segments	4
	C.   Employee Health Care, Life and Disability Benefits	5
	D.   Employee Retirement Benefits and Investment Services	16
	E.   International Life, Health and Employee Benefits	23
	F.   Run-off Reinsurance Operations	26
	G.   Other Operations	29
	H.   Investments and Investment Income	30
	I.    Regulation	37
	J.    Ratings	41
	K.   Miscellaneous	43
Item 2.	Properties	43
Item 3.	Legal Proceedings	43
Item 4.	Submission of Matters to a Vote of Security Holders	45
Executive Officers of the Registrant		45
PART II
Item 5.	Market for Registrant's Common Equity and Related Stockholder Matters	46
Item 6.	Selected Financial Data	46
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of
	Operations	46
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	46
Item 8.	Financial Statements and Supplementary Data	46
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial
	Disclosure	47
PART III
Item 10.	Directors and Executive Officers of the Registrant	47
	A.   Directors of the Registrant	47
	B.   Executive Officers of the Registrant	47
Item 11.	Executive Compensation	47
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	48
Item 13.	Certain Relationships and Related Transactions	48
Item 14.	Controls and Procedures	49
PART IV
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	49
Signatures		50
Certifications		51
Index to Financial Statement Schedules		FS-1
Index to Exhibits		E-1

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PART I

Item 1. BUSINESS

A. Description of Business

        CIGNA Corporation had consolidated shareholders’ equity of $3.9 billion and assets of $89.0 billion as of December 31, 2002, and revenues of $19.3 billion for the year then ended. CIGNA Corporation and its subsidiaries constitute one of the largest investor-owned employee benefits organizations in the United States. Its subsidiaries are major providers of employee benefits offered through the workplace, including health care products and services, group life, accident and disability insurance, retirement products and services and investment management. CIGNA’s major insurance subsidiary, Connecticut General Life Insurance Company (“CG Life”), traces its origins to 1865. CIGNA Corporation was incorporated in the State of Delaware in 1981.

        As used in this document, “CIGNA” and the “Company” may refer to CIGNA Corporation itself, one or more of its subsidiaries, or CIGNA Corporation and its consolidated subsidiaries. CIGNA Corporation is a holding company and is not an insurance company. Its subsidiaries conduct various businesses, which are described in this document.

        CIGNA’s revenues are derived principally from premiums and fees, and investment income. CIGNA conducts its business through subsidiaries in the following operating divisions, the financial results of which are reported in the following segments:

• Employee Health Care, Life and Disability Benefits Segment

• CIGNA HealthCare

• CIGNA Group Insurance

• Employee Retirement Benefits and Investment Services Segment

• CIGNA Retirement & Investment Services

• International Life, Health and Employee Benefits Segment

• CIGNA International

• Run-off Reinsurance Operations Segment

• Other Operations consists of:

• deferred gains recognized from the 1998 sale of the individual life insurance and annuity business;

• corporate life insurance on which policy loans are outstanding;

• settlement annuity business; and

• certain investment management services initiatives.

        Investment results produced by CIGNA Retirement & Investment Services on behalf of CIGNA’s insurance operations are reported in each segment’s results.

Recent Transactions

        In January 2003, CIGNA sold a subsidiary, Lovelace Health Systems, Inc. (“Lovelace”), an integrated health care system located in New Mexico that includes a multi-specialty physician group practice, a hospital, family practice clinics and a health plan for cash proceeds of approximately $210 million. The sale generated an after-tax gain of approximately $30 million, which will be recognized in the first quarter of 2003. In the fourth quarter, CIGNA began reporting this business as discontinued operations and reclassified prior year financial information. Unless otherwise indicated, all amounts exclude Lovelace for all periods presented. For additional information about the sale of Lovelace, see “Acquisitions and Dispositions” in the Management’s Discussion and Analysis (“MD&A”) section of, and Note 4 to the Financial Statements included in CIGNA’s

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2002 Annual Report to Shareholders (“Annual Report”).

        In January 2003, CIGNA sold its Brazilian health care operations. CIGNA expects to record a net gain of approximately $15 million after-tax in the first quarter of 2003 associated with the sale of the health care operations, primarily as a result of the disposition of the net liabilities associated with these operations. The gain will be reported as part of income from discontinued operations. For additional information about the sale of the Brazilian health care operations, see “Acquisitions and Dispositions” in the MD&A section of, and Note 4 to CIGNA’s 2002 Financial Statements included in its Annual Report.

Available Information

        CIGNA’s Internet address is http://www.CIGNA.com. CIGNA’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports are available through CIGNA’s website as soon as reasonably practicable after the filing or furnishing of such material with the Securities and Exchange Commission.

B. Financial Information about Industry Segments

        Financial information in the tables that follow is presented in conformity with generally accepted accounting principles (“GAAP”), unless otherwise indicated. Certain reclassifications have been made to the 2001 and 2000 financial information to conform to the 2002 presentation. Industry rankings and percentages set forth below are for the year ended December 31, 2001, unless otherwise indicated. Unless otherwise noted, statements set forth in this document concerning CIGNA’s rank or position in an industry or particular line of business have been developed internally, based on publicly available information.

        Financial data for each of CIGNA’s business segments is set forth in Note 19 and financial information for foreign operations is set forth in Note 20 to the Financial Statements included in CIGNA’s Annual Report.

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C. Employee Health Care, Life and Disability Benefits

Principal Products and Markets

        CIGNA’s Employee Health Care, Life and Disability Benefits operations offer a wide range of managed care and indemnity products and services primarily to meet the needs of employers of all sizes and their employees and dependents. These products and services are provided by subsidiaries of CIGNA Corporation.

        The customers of these operations range in size from some of the largest United States corporations to small enterprises, and include employers, multiple employer groups, unions, professional and other associations, government-sponsored programs and other groups. Products are marketed in all 50 states, the District of Columbia and Puerto Rico.

        The following table sets forth the net premiums and fees, premium equivalents and adjusted premiums and fees for this segment by principal product categories (described beginning on page 7) and by funding arrangements (described beginning on page 12). Premium equivalents generally equal paid claims under administrative services only (“ASO”) and minimum premium funding arrangements. CIGNA would have recorded the amount of these paid claims as additional premiums if the contracts under which the claims arise had been written under guaranteed cost or retrospectively experience-rated funding arrangements. Premium equivalents are an indicator of business volume associated with ASO and minimum premium arrangements and, when combined with premiums and fees (“adjusted premiums and fees”), convey the level of activity supported by the operations of this segment.

	Premiums and Fees		Premium Equivalents		Adjusted Premiums and Fees
Year ended December 31, 2002	(In millions)
By Product:
Managed Care:
Medical	$	6,496	$	8,632	$	15,128
Dental		408		-		408
Total Managed Care		6,904		8,632		15,536
Indemnity:
Medical		4,537		11,854		16,391
Life		1,587		-		1,587
Long-term Disability		469		40		509
Dental		535		2,140		2,675
Accidental Death and Dismemberment		207		-		207
Short-term Disability		75		48		123
Other		22		-		22
Total Indemnity		7,432		14,082		21,514
Total	$	14,336	$	22,714	$	37,050
By Funding Arrangement:
Guaranteed Cost	$	7,757	$	-	$	7,757
Retrospectively Experience-Rated		4,616		-		4,616
Administrative Services Only		1,676		20,292		21,968
Minimum Premium		287		2,422		2,709
Total	$	14,336	$	22,714	$	37,050

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	Premiums and Fees		Premium Equivalents		Adjusted Premiums and Fees
Year ended December 31, 2001	(In millions)
By Product:
Managed Care:
Medical	$	5,845	$	7,239	$	13,084
Dental		412		-		412
Total Managed Care		6,257		7,239		13,496
Indemnity:
Medical		4,047		10,871		14,918
Life		1,698		-		1,698
Long-term Disability		591		70		661
Dental		516		1,977		2,493
Accidental Death and Dismemberment		217		-		217
Short-term Disability		114		73		187
Other		19		-		19
Total Indemnity		7,202		12,991		20,193
Total	$	13,459	$	20,230	$	33,689
By Funding Arrangement:
Guaranteed Cost	$	7,269	$	-	$	7,269
Retrospectively Experience-Rated		4,269		-		4,269
Administrative Services Only		1,665		17,825		19,490
Minimum Premium		256		2,405		2,661
Total	$	13,459	$	20,230	$	33,689
Year ended December 31, 2000
By Product:
Managed Care:
Medical	$	5,788	$	6,769	$	12,557
Dental		407		-		407
Total Managed Care		6,195		6,769		12,964
Indemnity:
Medical		3,607		9,092		12,699
Life		1,764		-		1,764
Long-term Disability		556		69		625
Dental		483		1,776		2,259
Accidental Death and Dismemberment		230		-		230
Short-term Disability		102		76		178
Other		22		-		22
Total Indemnity		6,764		11,013		17,777
Total	$	12,959	$	17,782	$	30,741
By Funding Arrangement:
Guaranteed Cost	$	7,061	$	-	$	7,061
Retrospectively Experience-Rated		4,107		-		4,107
Administrative Services Only		1,546		15,624		17,170
Minimum Premium		245		2,158		2,403
Total	$	12,959	$	17,782	$	30,741

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Products and Services

        Health care products and services and life, accident and disability insurance are this segment’s principal product lines. CIGNA provides a wide array of products and services to satisfy the benefit needs of employers and their employees and dependents, as described below:

• managed care products and services, such as:

• medical health maintenance organizations ("HMOs"),

• point-of-service ("POS") medical plans,

• managed dental programs,

• managed behavioral health care services and employee assistance programs,

• medical cost and utilization management, and

• managed pharmacy programs and pharmaceutical fulfillment services;

• indemnity products and services, such as:

• medical and dental preferred provider organizations ("PPOs"),

• traditional medical and dental indemnity,

• indemnity pharmacy programs, and

• life, accident and disability insurance.

Managed Care Products and Services

        Managed care products provide for an effective, efficient use of health care services by coordinating utilization of care and controlling unit costs through provider contracts. Managed care products and services include those described below.

        Medical Health Maintenance Organizations. HMOs generally offer the most cost-efficient form of health care coverage. Members typically choose a primary care physician from CIGNA’s provider network. Primary care physicians are responsible for the member’s primary medical and preventive care. In some cases, a member must receive a referral from his or her primary care physician to receive covered services from a participating specialist or medical facility in order to have those services covered under the member’s plan.

        CIGNA also provides an open access HMO product. This product offers the member an HMO network of providers without the requirement of a referral from the primary care physician in order to have services provided by a participating specialist or medical facility covered under the member’s plan.

        CIGNA delivers its medical HMOs principally through individual practice association (“IPA”) models.

        Under an IPA model, the HMO contracts with independent physicians and hospitals to provide services to members. IPA models typically cover wide geographic areas and have low fixed costs. They rely on cost-effective contracts with providers and appropriate medical cost and utilization management to deliver quality medical care at an appropriate cost. CIGNA has one medical HMO that offers the consumer both an IPA model and a staff model. In a staff model, physicians and certain other providers are employees of the medical HMO.

        IPA models typically offer broader provider choice to the consumer, whereas staff models generally offer more limited provider choice but lower costs.

        As of December 31, 2002, CIGNA’s HMO networks included approximately 255,000 physicians and 2,600 hospitals.

        Most contracted providers are compensated by CIGNA on a discounted fee-for-service or other service-specific basis for health care services provided to the member. Certain of CIGNA’s HMO providers receive a monthly predetermined fee (capitation) from CIGNA to cover the cost of certain services available to each HMO member, regardless of the medical services actually provided to each member. Capitation arrangements shift some of the financial risk from CIGNA to the providers.

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        In some cases, capitated providers subcontract with other providers for certain health care services. In the event that the capitated provider is paid but fails to pay its subcontracted providers, the subcontracted providers or regulators may attempt to look to the CIGNA HMO for payment. The CIGNA HMO may, in some cases, voluntarily make additional payments directly to the subcontracted providers to ensure continuity of care to its members through the provider network. A few states have adopted laws or regulations requiring that HMOs pay subcontracted providers in this situation. CIGNA HMOs typically require a satisfactory letter of credit or other financial guarantee from the capitated provider to protect CIGNA from this possible exposure, although not all capitated arrangements have this protection.

        CIGNA contracts with the federal Centers for Medicare and Medicaid Services (“CMS”) to provide Medicare HMO coverage for eligible individuals in Arizona. The contract provides for a fixed per member per month premium from CMS, based upon a formula that calculates the projected cost of providing services for each Medicare member. Premium amounts are updated annually. Members generally receive enhanced benefits over standard Medicare fee-for-service coverage, including prescription drug and vision coverage, and pay lower, fixed co-payments for services used. Depending on the plan benefits selected, members may be required to pay an additional premium to CIGNA for their HMO coverage.

        CIGNA is also a participating provider in the fee-for-service Medicare program, furnishing outpatient care to Medicare beneficiaries, through CIGNA subsidiaries. Until the sale of Lovelace in January 2003, CIGNA also furnished fee-for-service inpatient care to Medicare beneficiaries.

        Reimbursement for inpatient and outpatient services is made by CMS pursuant to laws and regulations governing the Medicare program. Currently, CMS reimburses outpatient services in accordance with payment classification groups based on historical cost information filed by the participating CIGNA subsidiary. CMS reimburses inpatient stays at a case rate based on the patient’s diagnosis. A government investigation relating to cost reports filed by Lovelace was settled in 2002. For additional information, see “Legal Proceedings”on  page 43 and “Regulatory and Industry Developments”in the MD&A section of, and Note 21 to CIGNA’s 2002 Financial Statements included in its Annual Report.

        CIGNA also contracts with one state agency (two prior to the sale of Lovelace) to offer coverage for individuals eligible for Medicaid and with the Office of Personnel Management (“OPM”) for the federal employees program. Benefits are generally determined by the contracting agencies. Medicaid premiums are determined by the contracting agency, while CIGNA agrees upon rates with OPM for the federal employee plan.

        Point-of-Service Medical Plans. Under POS medical plans, participants generally pay an HMO-type fixed co-payment to use CIGNA’s managed care network providers. Alternatively, participants may choose to go to non-network providers. Use of non-network providers is subject to certain deductibles and cost sharing provisions, which result in a higher cost to participants than if they used network providers. Participants in point-of-service plans are considered HMO members for purposes of the table on page 10.

        Managed Dental Programs. CIGNA offers managed dental care products through a network of independent providers in most states. CIGNA contracts with dentists to provide services to members. Most network dentists receive a monthly predetermined fee (capitation) for each covered member. Network dentists may also receive additional fees for certain services. Generally, members are responsible for a fixed co-payment for certain covered services provided by a network dentist.

        Managed Behavioral Health. CIGNA also provides managed behavioral health care services and employee assistance programs. CIGNA provides its behavioral health care coverage through a national network of independent behavioral health providers and facilities that are paid on a contracted fee-for-

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service basis. Members pay a fixed co-payment for most of these services.

        Medical Cost and Utilization Management.  In addition, CIGNA provides disability management and medical cost containment services to help insurers and employers optimize the quality relative to the cost of certain of their benefit programs.

        Managed Pharmacy Programs. CIGNA also provides managed pharmacy benefit programs to HMO and POS members through participating national and independent pharmacies. Members typically pay a fixed co-payment for these services.

        CIGNA also offers mail order, telephone and on-line pharmaceutical fulfillment services through its CIGNA Tel-Drug operation. Tel-Drug offers to managed care and PPO participants a cost effective alternative to other participating pharmacies at the same benefit levels offered by the consumer’s underlying medical benefits plan.

Credentialing

        CIGNA promotes the delivery of quality care under its managed care products in part through its credentialing of medical providers and facilities, using its own quality criteria which meet external accreditation agency standards.

        CIGNA’s practitioner credentialing criteria include verification of a current unrestricted professional license, a valid and unrestricted license to prescribe drugs (as appropriate), board certification or other appropriate training and hospital privileges at a CIGNA participating facility. In addition, CIGNA queries the National Practitioner Data Bank to obtain information about the practitioner’s malpractice experience and also obtains Medicare sanction activity. CIGNA expects practitioners to demonstrate an acceptable history of malpractice claim experience, adequacy of malpractice insurance coverage and an acceptable work history. Typically, most practitioners are recredentialed every two years.

        To be credentialed, CIGNA requires the medical facilities with which it contracts to have an unrestricted state license, no sanctions by the Department of Health and Human Services, accreditation by an approved accrediting organization and adequate malpractice and general liability coverage. Typically, most medical facilities are recredentialed every three years.

        CIGNA also seeks accreditation of its medical HMOs by the National Committee for Quality Assurance (“NCQA”). The NCQA is a nationally recognized independent, not-for-profit organization dedicated to assessing, measuring and reporting on the quality of managed care plans. As of December 31, 2002, 100% of CIGNA’s U.S. plan locations have gone through the NCQA accreditation review process, and 100% have received Excellent or Commendable accreditation for HMO and POS products.

Indemnity Products and Services

        Preferred Provider Organizations. CIGNA has contractual arrangements with certain physicians, hospitals and other independent providers that comprise medical and dental PPO networks. Under a typical PPO plan, a participant may elect (with certain exceptions) to receive care from any health care provider. Within applicable state requirements and restrictions, CIGNA reimburses PPO participants at a higher percentage for the costs of care obtained from contracted providers, who are generally paid on a discounted basis, than it does for care obtained from non-contracted providers. As of December 31, 2002, 2001 and 2000, CIGNA had 140, 139 and 137 medical PPO networks. As of the same dates, CIGNA’s national dental PPO network had approximately 57,000, 54,000 and 50,000 participating dentists.

        Some of CIGNA’s medical PPO networks, called “Gatekeeper PPOs”, use contracted primary care physicians to make referrals to specialists and other health care providers. Under a Gatekeeper PPO, the higher reimbursement level is usually available only if participants obtain a referral from their primary care physicians before using other

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contracted providers. As of December 31, 2002 and 2001, CIGNA had 48 Gatekeeper PPO networks in addition to its medical PPO networks that do not require referrals from the primary care physician. As of December 31, 2000, CIGNA had 38.

        Participants in Gatekeeper PPOs are considered HMO members for the purposes of the covered lives table below.

        Traditional Medical and Dental Indemnity. Traditional medical and dental indemnity products generally do not restrict selection of providers or vary their insureds’ cost sharing obligations depending on the providers chosen. The costs of traditional indemnity products to customers are higher than managed care products, due to the limited number of negotiated fee arrangements with physicians and hospitals to control unit costs and limited influence over the utilization of services. Under indemnity arrangements, insureds usually pay deductibles and coinsurance, subject to annual out-of-pocket maximums.

        Indemnity Pharmacy Programs. CIGNA also provides pharmacy programs to its PPO and traditional medical indemnity participants. Participants may choose to pay the retail price of prescriptions, or obtain prescriptions at a lower price from the program’s participating pharmacies. As stated above, PPO participants also have access to mail order, telephone and on-line pharmaceutical fulfillment services through Tel-Drug, which is a cost effective alternative to other participating pharmacies.

Covered Lives

        CIGNA’s medical and dental managed care and indemnity products and services and managed behavioral health care services applied to the following approximate number of lives for the periods presented:

Approximate Number of Covered Lives

	As of December 31,
	2002		2001		2000
	(In thousands)
Medical Covered Lives
Managed Care:
Guaranteed Cost:
Commercial		1,752		2,016		1,921
Medicare and Medicaid		113		84		138
Experience-rated, ASO and Minimum Premium
(including POS and Gatekeeper PPOs)		4,885		4,709		5,013
Total Managed Care		6,750		6,809		7,072
Indemnity (estimated):
Medical		995		1,089		1,473
Medical PPO (excluding Gatekeeper PPOs)		5,346		5,352		4,669
Total Indemnity		6,341		6,441		6,142
Total Medical Covered Lives		13,091		13,250		13,214
Behavioral Care		14,113		13,346		12,172
Dental Covered Lives:
Managed Care		2,559		2,756		2,833
Indemnity and Dental PPO (estimated)		10,458		10,600		10,246
Total Dental Covered Lives		13,017		13,356		13,079
Pharmacy		9,773		9,356		*

* Not available for 2000.

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        During 2002, CIGNA revised the factor used to estimate the number of covered lives per subscriber in estimating indemnity and managed behavioral health care membership levels. The revised estimate reflects updated information resulting from recent technology enhancements. Prior period information has been revised using this updated information. For more information, see “Medical Membership” in the MD&A section of CIGNA’s Annual Report.

        Life, Accident and Disability Insurance Products and Services. CIGNA also offers group life insurance, accidental death and dismemberment insurance, and long-term and short-term disability insurance products and services. Group insurance products are marketed to employers, employees, professional and other associations and other groups.

        Group life insurance products include group term life, group universal life and group variable universal life insurance. Group term life insurance may be employer-paid basic life insurance or employee-paid supplemental life insurance, and also may be offered through groups other than employers and unions. Group universal life insurance is a voluntary life insurance product in which the owner may accumulate cash value. The cash value earns interest at rates declared from time to time, subject to a minimum guaranteed rate, and may be borrowed, withdrawn, or used to fund future life insurance coverage. With group variable universal life insurance, the cash value varies directly with the performance of the underlying investments and neither the return nor the principal is guaranteed.

        Approximately 5,400 group life insurance policies covering approximately 18.3 million lives were outstanding as of December 31, 2002. The following table shows group life insurance in force and cancellation data.

	Year Ended December 31,
	2002		2001		2000
	(In billions)
In force, end of year	$	375	$	456	$	444
Cancellations (lapses
and expirations)	$	62	$	30	$	50

        CIGNA markets group long-term and short-term disability insurance products in all states and statutorily required disability insurance plans in certain states. CIGNA’s integrated disability insurance products coordinate short-term disability, long-term disability and workers’ compensation with health care coverages to provide increased efficiency and effectiveness in disability claims management. These products generally provide a fixed level of income to replace a portion of wages lost because of disability. They also provide assistance in return to work and assistance to the employer in managing the cost of employee disability.

        CIGNA offers personal accident coverage, which consists primarily of accidental death and dismemberment and travel accident insurance, to employers, associations and other groups.

Distribution

        CIGNA employs group sales representatives to distribute the managed care and indemnity products and services of this segment through national and other insurance brokers, insurance consultants and directly to employers. CIGNA also employs representatives to sell disability management, medical and disability cost containment, and managed behavioral health care services and employee assistance programs directly to insurance companies, HMOs, third party administrators and employer groups. As of December 31, 2002, the field sales force for the products and services of this segment consisted of approximately 730 sales representatives in 95 field locations.

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Funding Arrangements

        The segment’s managed care and indemnity products and services are offered through guaranteed cost, retrospectively experience-rated, administrative services only (“ASO”) and minimum premium funding arrangements. Customers may combine funding arrangements to benefit from the features of more than one.

        Under guaranteed cost arrangements, CIGNA charges a fixed premium and bears the risk for costs incurred in excess of the premium.

        Under retrospectively experience-rated arrangements, a premium that typically includes a margin to partially protect against adverse claim fluctuations is determined at the beginning of the policy period and may be adjusted at the end of the policy period based on the actual incurred costs over the policy period. CIGNA generally bears the risk for costs incurred in excess of premiums, but has the potential to recover this excess from policyholders that renew their experience-rated contracts with CIGNA. For additional discussion, see “Pricing, Reserves and Reinsurance” below.

        Under ASO plans, the customer or plan sponsor, rather than CIGNA, assumes the risk for claim costs incurred. CIGNA provides claims processing, health quality and medical cost containment services (through its provider networks) or utilization management programs, or a combination of these services, in exchange for an administrative service fee. The plan sponsor is responsible for self-funding all claims, but may purchase stop-loss insurance from CIGNA or other insurers for claims in excess of some predetermined amount in total or for specific types of claims or both.

        Minimum premium programs combine insurance protection with an element of self-funding. The policyholder assumes the risk for claim costs up to a predetermined aggregate, maximum amount and CIGNA bears the risk for claim costs incurred in excess of that amount, but has the potential to recover this excess from policyholders that renew their minimum premium contracts with CIGNA. Accordingly, minimum premium funding arrangements have a risk profile similar to retrospectively experience-rated funding arrangements.

        ASO and minimum premium funding programs and their effect on CIGNA’s results are more fully described in the MD&A section of CIGNA’s Annual Report under the heading “Premium Equivalents”.

Pricing, Reserves and Reinsurance

        Premiums and fees charged for most insured managed care and indemnity products are generally set in advance of the policy period and are guaranteed for a one-year duration. Premiums and fees charged for disability and life insurance products are often guaranteed for two years, and occasionally for three years, but contracts may be subject to termination.

        Premium rates are established either on a guaranteed cost basis or on a retrospectively experience-rated basis. Charges to customers established on a guaranteed cost basis at the beginning of the policy period cannot be adjusted to reflect actual claim experience during the policy period.

        A guaranteed cost pricing methodology reflects assumptions about future claims, expenses, credit risk, enrollment mix, investment returns, competitive considerations and profit margins. Claim and expense assumptions may be based in whole or in part on prior experience of the account or on a pool of accounts, depending on the group size and the statistical credibility of the experience. Generally, guaranteed cost groups are smaller and less statistically credible than retrospectively experience-rated groups. In addition, pricing for health care products that use networks of contracted providers also reflects assumptions about the impact of provider contracts on future claims. Premium rates may vary among accounts to reflect the anticipated contract mix, family size, industry, renewal date, and other cost-predictive factors. In some states, premium rates must be approved by the state insurance

12

departments, and state laws may restrict or limit the use of rating methods.

        Premiums established for retrospectively experience-rated business may be adjusted for the actual claim and administrative cost experience of the account through an experience settlement process subsequent to the policy period. To the extent that the cost experience is favorable in relation to the prospectively determined premium rates, a portion of the initial premiums may be credited to the policyholder as an experience refund. If claim experience is adverse in relation to the initial premiums, the resulting experience deficit may be recoverable, according to contractual provisions, through future premiums and experience settlements, provided the contract remains in force.

        CIGNA contracts on an ASO basis with customers who fund their own claims. CIGNA charges these customers administrative fees based on the expected cost of administering their self-funded programs. These fees reflect anticipated or actual experience with respect to claim volumes, expenses, competitive considerations, and profit margins. In some cases, CIGNA provides financial guarantees related to administrative performance standards. If these standards are not met, CIGNA may be financially at risk up to a percentage of the contracted fee or a stated dollar amount.

        In addition to paying current benefits and expenses, CIGNA establishes reserves in amounts estimated to be sufficient to settle reported claims not yet paid, as well as claims incurred but not yet reported. Also, reserves are established for estimated experience refunds based on the results of retrospectively experience-rated policies.

        As of December 31, 2002, approximately $3.0 billion, or 43%, of the reserves of this segment comprise liabilities that could be paid within one year, primarily for medical and dental managed care and indemnity claims, as well as group life and accident insurance claims. The remainder primarily includes liabilities for group long-term disability insurance benefits, group life insurance benefits for disabled and retired individuals, and benefits paid in the form of both life and non-life contingent annuities to survivors.

        CIGNA credits interest on fund balances to retrospectively experience-rated policyholders through rates that are either set at CIGNA’s discretion or based on actual investment performance. Generally, for interest-crediting rates set at CIGNA’s discretion, higher rates are credited to funds with longer terms reflecting the fact that higher yields are generally available on investments with longer maturities. For 2002, the rates of interest credited ranged from 1.18% to 6.45%, with a weighted average rate of 3.97%.

        The profitability of indemnity products depends on the adequacy of premiums charged relative to claims and expenses. For medical and dental indemnity and managed care products, profitability reflects the accuracy of cost projections for health care (unit costs and utilization), the adequacy of fees charged for administration and risk assumption and effective medical cost and utilization management. For disability insurance products, profitability reflects effective rehabilitation management as well as adequate return on invested assets.

        CIGNA reduces its exposure to large individual and catastrophe losses under group life, disability and accidental death contracts by purchasing reinsurance from unaffiliated reinsurers.

Competition

        Managed care and indemnity businesses are highly competitive. Recent industry consolidation (especially among Blue Cross and Blue Shield companies) and the development of PPO products that are competitive with CIGNA’s have exacerbated this already competitive business environment. No one competitor or small number of competitors dominates the health care market, although in certain geographic locations some health care companies may have significant market share positions. A large number of health care companies and other entities compete in offering similar

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products. Competition in the health care market exists both for employer-policyholders and for the employees in those instances where the employer offers its employees the choice of products of more than one health care company. Most group policies are subject to annual review by the policyholder, which may seek competitive quotations prior to renewal.

        The principal competitive factors that affect this segment are quality of service; scope, cost-effectiveness and quality of provider networks for health care products; product responsiveness to the needs of customers and their employees; cost-containment services; technology; price; and effectiveness of marketing and sales. For certain products with longer-term liabilities, such as group long-term disability insurance, financial strength of the insurer, as indicated by ratings issued by nationally recognized rating agencies, is also a competitive factor. For more information concerning insurance ratings, see “Ratings” beginning on page 41.

        CIGNA believes that its national scope, product breadth, funding options and ability to offer non-medical products (e.g., dental, managed behavioral health care, medical cost and utilization management and pharmacy programs) with its group health offerings are strategic competitive advantages. These advantages allow CIGNA to respond to the diverse needs of its customer base in each market in which it operates.

        The principal competitors of CIGNA’s managed care and indemnity businesses are:

• other large life and health insurance companies that provide group life and health insurance products;

• Blue Cross and Blue Shield organizations;

• stand-alone HMOs and PPOs;

• HMOs affiliated with major insurance companies and hospitals; and

• national managed pharmacy, behavioral health and cost containment services companies.

        Competition also arises from smaller regional or specialty companies with strength in a particular geographic area or product line, administrative service firms and, indirectly, self-insurers. In addition to these traditional competitors, a new group of competitors is emerging. These new competitors are focused on delivering employee benefits and services through Internet-enabled technology that allow consumers to take a more active role in the management of their health. This is accomplished primarily through financial incentives and access to enhanced medical quality data. Management believes that it has the capabilities to allow it to compete against both the traditional and new competitors.

        CIGNA is one of the largest investor-owned managed care companies, based on the number of members, and one of the largest investor-owned providers of group life and health indemnity insurance, based on premiums and premium equivalents. It is also one of the largest providers of group accident insurance and group long-term disability coverages, based on premiums.

Technology

        CIGNA’s health care, life and disability benefits businesses are highly dependent on automated systems and systems applications. These businesses are working to improve their system infrastructure, standardize business processes and design more flexible, easier-to-use products. CIGNA’s health care business is currently engaged in a multi-year project to convert to newly designed systems and processes to support business growth and service to customers as well as to accommodate new products and ongoing regulatory changes. In 2002, CIGNA began transitioning certain customers to these new systems and experienced a decline in customer service, retention and new sales as a result of transition difficulties. CIGNA is devoting resources to improving customer service and the underlying system issues, but expects continued depressed new sales and customer retention levels for 2003.

        In 2002, CIGNA implemented the myCIGNA.com consumer Internet portal, which provides personalized web pages to CIGNA customers for health and financial benefits information. The portal is personalized to each member’s specific

14

CIGNA medical, dental and pharmacy plan information (as well as financial information described in Section D, Employee Retirement Benefits and Investment Services on page 16). CIGNA also introduced a package of web-based self-service tools for physicians and other providers.

        Among other things, the technology efforts of this business are intended to enhance customer service, improve operating efficiency and facilitate regulatory compliance.

Health Care Regulation

        Federal and state legislatures, administrative agencies and courts continue efforts to increase regulation of the health care industry and change its operational practices. Regulatory and operational changes could have an adverse effect on CIGNA’s health care operations if they reduce marketplace competition and innovation or result in increased medical or administrative costs without improving the quality of care. Debate at the federal level over “managed care reform” and “patients’ bill of rights” legislation, focusing on questions regarding liability, is expected to continue.

        The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and other federal and state statutes subject health care insurers and HMOs to regulation. See Section I, “Regulation” on page 37 for a description of the impact of HIPAA and other statutes on CIGNA.

        Other possible regulatory changes that could have an adverse effect on CIGNA’s health care operations include:

• additional mandated benefits or services that increase costs without improving the quality of care;

• narrowing of the Employer Retirement Income Security Act of 1974 (“ERISA”) preemption of state laws;

• changes in ERISA regulations resulting in increased administrative burdens and costs;

• additional restrictions on the use of prescription drug formularies;

• additional privacy legislation and regulations that interfere with the proper use of medical information for research, coordination of medical care and disease management;

• additional rules establishing the time periods for payment of health care provider claims that vary from state to state; and

• legislation that would exempt independent physicians from antitrust laws.

        The health care industry is under increasing scrutiny by various state and federal government agencies and could be subject to government efforts to bring criminal actions in circumstances that could previously have given rise only to civil or administrative proceedings.

        See “Regulation” and “Legal Proceedings” on pages 37 and 43 for additional information.

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D. Employee Retirement Benefits and Investment Services

General

        CIGNA’s Employee Retirement Benefits and Investment Services businesses provide investment products and professional services to sponsors of qualified and non-qualified pension, profit sharing and retirement savings plans. This segment’s businesses also offer corporate life insurance, principally to Fortune 1000 companies, and operate a retail broker-dealer operation and a federal savings bank. Except for certain investment management services provided by unaffiliated entities, as described below, the products and services related to this segment are provided by CIGNA subsidiaries.

        Deposits and assets under management for this segment (“Retirement Assets under Management”) for the year ended December 31 were as follows:

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	2002		2001		2000
	(In millions)
Deposits:
Defined Contribution	$	5,581	$	6,125	$	7,480
Defined Benefit		1,993		2,708		1,654
Other, including GICs(1)		61		688		102
Corporate Life Insurance(2)		865		570		602
Investment Advisory Accounts(3)		272		58		104
Total Deposits	$	8,772	$	10,149	$	9,942
Retirement Assets Under Management:
By Account:
General Account(4):
Fully Guaranteed	$	4,422	$	4,443	$	4,145
Experience-rated		18,445		16,542		15,510
		22,867		20,985		19,655
Separate Accounts		25,453		29,391		30,889
Corporate Life Insurance(2)		4,281		3,943		3,725
Investment Advisory Accounts(3)		1,156		987		885
Total	$	53,757	$	55,306	$	55,154
By Plan Type:
Defined Contribution	$	28,062	$	29,853	$	30,620
Defined Benefit		18,547		18,690		18,370
Other, including GICs(1)		1,711		1,833		1,554
Corporate Life Insurance(2)		4,281		3,943		3,725
Investment Advisory Accounts(3)		1,156		987		885
Total	$	53,757	$	55,306	$	55,154

_________________
Assets under management include assets managed by third-party managers.

(1) This category also supports defined benefit and defined contribution plans.

(2) Corporate Life Insurance consists of general and separate account assets. Corporate Life Insurance excludes corporate life insurance business on which policy loans are outstanding. For a discussion of corporate life insurance business on which policy loans are outstanding, see Section G “Other Operations” on page 29.

(3) Investment advisory accounts include assets for individual retirement account investments and retail brokerage services provided through the broker dealer operation, as well as advisory accounts sold by Retirement personnel.

(4) General Account assets under management (Defined Contribution, Defined Benefit and Other, including guaranteed investment contracts (“GICs”)) reflect adjustments to fair value on fixed income and certain other investments of $872 million as of December 31, 2002, $256 million as of December 31, 2001 and $74 million as of December 31, 2000.

Principal Products and Markets

        CIGNA offers a broad range of products to both defined benefit and defined contribution pension plans, profit-sharing plans and retirement savings plans. The largest category of Retirement Assets under Management relates to defined contribution plans, which provide participant accounts with benefits based upon the value of contributions to, and investment returns on, the individual’s account. This has been the fastest growing portion of the pension marketplace for a number of years. Defined contribution plan assets amounted to 52% of Retirement Assets under Management as of December 31, 2002, compared with 54% as of December 31, 2001. The second largest category of Retirement Assets under Management relates to defined benefit plans, under which annual retirement benefits are fixed or defined by a benefit formula.

        CIGNA sells investment products and investment management services, either separately or as full-service packages with

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administrative and other professional services, to corporate pension plan sponsors and Taft-Hartley trustees. CIGNA markets full-service products that include investment management and pension services to small, middle and large market customers. In addition, CIGNA sells products to sponsors of larger plans that look to more than one entity to provide actuarial, administrative or investment services and products, or combinations thereof.

        CIGNA markets a Total Retirement Services® offering, which integrates tax qualified and non-qualified defined contribution and defined benefit products and services. Non-qualified plans are primarily used to provide supplemental retirement benefits to highly compensated employees in addition to the benefits offered under the qualified plan. Total Retirement Services® plans accounted for approximately 24% of Retirement Assets under Management as of December 31, 2002 compared with 25% as of December 31, 2001. The assets of CIGNA’s pension plans and CIGNA-sponsored 401(k) plans for CIGNA employees are included in Total Retirement Services® plans. If the impact of the those plans are excluded, Total Retirement Services® plans accounted for approximately 18% of Retirement Assets under Management as of December 31, 2002 compared with 19% as of December 31, 2001.

        For defined contribution plans, principally 401(k) plans, CIGNA markets products that offer investment services, participant recordkeeping and plan administrator support services. CIGNA’s defined contribution plans also offer employee communications, enrollment, plan design, technological support and other consulting services. For defined benefit plans, CIGNA offers investment services and administrative and professional services, including recordkeeping, plan administrator support services, plan documentation, and actuarial valuation and advice.

        CIGNA also provides retail brokerage and banking products and services. A primary focus of the retail operation is offering individual retirement account rollover products and related banking and brokerage services to terminating plan participants. A federal savings bank subsidiary offers retail banking products, including certificates of deposit and individual retirement accounts. In addition, CIGNA’s broker-dealer operation manages a self-directed brokerage account feature in CIGNA-administered 401(k) plans as well as other retail brokerage accounts.

        CIGNA also offers single premium annuities, on both guaranteed and experience-rated bases, and guaranteed investment contracts (“GICs”), which provide guarantees of principal and interest with a fixed maturity date.

        CIGNA manages Retirement Assets under Management either directly or through contractual arrangements under which CIGNA selects and oversees sub-advisors who invest assets based on guidelines determined by CIGNA (“Sub-advisory Arrangements”). In addition, a portion of the Retirement Assets under Management are invested in retail funds managed by third-party mutual fund managers, including Fidelity Investments, Janus, Invesco and State Street, under guidelines determined by the mutual fund managers (“Independent Funds”). CIGNA monitors the Independent Funds on behalf of its customers. The table below shows the percentage of Retirement Assets under Management managed through each of these methods as of December 31:

	2002	2001
Direct	70%	66%
Sub-advisory	11%	12%
Independent	19%	22%

        For additional information about CIGNA’s investment operations, see Section H “Investments and Investment Income” on page 30.

        Both defined benefit and defined contribution pension products are supported by the general asset account (“General Account”) and segregated accounts (“Separate Accounts”).

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The General Account

        The General Account primarily invests in fixed income assets, and supports both fully guaranteed and experience-rated contracts. As of December 31, 2002, the General Account-supported contracts accounted for 39% of the underlying investments in defined benefit plans and 50% in defined contribution plans, compared with 36% in defined benefit plans and 41% in defined contribution plans as of December 31, 2001.

        Fully guaranteed contracts consist of single premium annuities and GICs. Single premium annuities accounted for $2.7 billion of this segment’s General Account assets under management as of December 31, 2002 compared with $2.6 billion as of December 31, 2001. GICs and other guaranteed products accounted for $1.7 billion as of December 31, 2002 and $1.8 billion as of December 31, 2001.

        For 2002, the interest rate on reserves for single premium annuities and the interest rate credited on GICs ranged from .8% to 12.76%, with a weighted average of 6.71%, compared with a range from 1.16% to 12.76% with a weighted average of 6.93% in 2001. CIGNA’s single premium annuities and GICs generally do not permit withdrawal by the plan sponsor prior to maturity, except that GICs permit withdrawal at market value in the event of plan termination. None of the GICs include renewal clauses. Payouts associated with GICs have not been material to CIGNA’s liquidity or capital resources.

        Experience-rated contracts that are supported by the General Account have no fixed maturity dates and provide for transfer of net investment experience (including impairments and non-accruals) to contractholders through credited interest and termination provisions, subject to a guarantee of a minimum level of benefits.

        Credited interest rates for pooled, experience-rated defined contribution contracts are declared in advance for six months and may be changed at the expiration of the six-month period. Pooled contracts are contracts that are combined for purposes of crediting interest rates and tracking investment performance. Credited interest rates on other experience-rated contracts supported by the General Account are generally declared annually in advance and may be changed prospectively by CIGNA from time to time. Credited interest rates reflect investment income and realized gains and losses (including the effect of non-accruals and impairments). Credited interest rates for 2002 ranged from 4.65% to 8.00% compared to a range of 5.55% to 9.00% for 2001. The weighted average rate was 5.75% for 2002 compared with 6.88% for 2001.

        The termination provisions of $3.3 billion, or 100%, of CIGNA’s liability for experience-rated defined benefit contracts supported by the General Account that are subject to withdrawal, and the termination provisions of $5.0 billion, or 37%, of CIGNA’s liability for experience-rated defined contribution contracts supported by the General Account, provide the contractholder with essentially two options for withdrawal of assets upon election to terminate: (a) a lump sum at market value; or (b) annual installments.

        Under the market value option, CIGNA determines the market value of the underlying investments by use of public information or by discounting expected future investment cash flows from investment income (including the effect of non-accruals) and repayment of principal, including the effect of impaired assets. The discount rate is based on current market interest rates.

        Under the installment option, 100% of the contractholder book value is paid, usually over not more than 10 years. Interest is credited over the installment period under a formula designed to pass investment income and gains and losses (reflecting non-accruals and impairments) through to contractholders.

        The termination provisions of the remaining $8.5 billion, or 63%, of CIGNA’s liability for experience-rated defined contribution contracts (all of which are pooled) supported by the General Account contain a book value mechanism for withdrawal at contractholder termination.

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Under certain circumstances, payout of book value is subject to deferral over a period of five to ten years, depending on the policy form.

Separate Accounts

        Separate Account assets are contractholder funds maintained in accounts with specific investment objectives. The assets of these accounts are legally segregated and are not subject to claims that arise out of any of CIGNA’s other businesses. The investment income, gains and losses of these accounts generally accrue to the contractholders and are not included in CIGNA’s revenues and expenses. CIGNA realizes fee income for the investment management and other services it provides for Separate Account contractholders. The Separate Accounts allow contractholders the flexibility to invest in specific portfolios and participate directly in the investment results. Investment options include publicly traded bonds, private placement bonds, equities, real estate, short-term securities, mutual funds and funds managed by third-party managers.

        As of December 31, 2002, Separate Account investments accounted for 61% of the underlying investments in defined benefit plans and 50% in defined contribution plans, compared with 64% for defined benefit plans and 59% for defined contribution plans as of December 31, 2001. As of December 31, 2002 approximately $20.6 billion, or 81%, of the assets in the Separate Accounts supported contracts under which the risks and benefits of investment performance generally accrue to the contractholders, compared with approximately $25.2 billion, or 86%, of Separate Account assets as of December 31, 2001.

        The remaining assets in the Separate Accounts are held under experience-rated contracts that guarantee a minimum level of benefits. As of December 31, 2002 the amount of minimum benefit guarantees under these contracts was $4.9 billion compared with $4.1 billion as of December 31, 2001. CIGNA establishes a liability if management believes that CIGNA will be required to make a payment under a Separate Account guarantee. For additional information, see “Liquidity and Capital Resources” in the MD&A section of, and Note 21 to CIGNA’s 2002 Financial Statements included in its Annual Report.

Persistency

        CIGNA monitors contract termination experience on an ongoing basis. Of those defined contribution and defined benefits assets under management subject to withdrawal, persistency was 92.3% for 2002, 92.7% for 2001 and 91.3% for 2000.

Corporate Life Insurance

        Corporate life insurance products are permanent life insurance contracts that are sold to corporations to provide coverage on the lives of certain of their employees. Permanent life insurance, which is non-participating, provides coverage that when adequately funded does not expire after a term of years and builds a cash value that may equal the full policy amount if the insured is alive on the policy maturity date. Non-participating insurance does not pay dividends, but deviations from assumed experience may be reflected in future policy values.

        Corporate life insurance products include universal life and variable universal life. Universal life policies typically provide flexible coverage and flexible premium payments. Universal life cash values fluctuate with the amount of the premiums paid, mortality and expense charges made, and interest credited to the policy. Variable universal life policies are universal life contracts where the cash values vary directly with the performance of the investments underlying the policy.

        Interest is credited on most nonvariable universal life products at a declared rate equal to or above a minimum guaranteed rate. Credited interest rates vary with the characteristics of each product and the anticipated investment results of the assets backing these products. Where the credited interest rate exceeds the guaranteed rate, the excess is used to purchase additional

20

insurance or increase cash values. Credited interest rates on these products for 2002 ranged from 1.11% to 7.14%, with a weighted average rate of 5.13%, compared with a range from 3.00% to 7.31%, with a weighted average rate of 5.58% for 2001.

        In lieu of credited interest rates, certain nonvariable universal life contracts are credited income based on changes in an equity index, such as the S&P 500®. If such an equity index is used, CIGNA may purchase derivative options to minimize the effect of the income credited for such contracts. For additional information about such derivative options, see Note 7(G) to CIGNA’s 2002 Financial Statements included in its Annual Report.

        In 1996, Congress passed tax legislation that has affected premium and earnings growth of certain corporate life insurance business on which policy loans are outstanding. The corporate life insurance affected by the 1996 legislation is reported in Section G “Other Operations” on page 29.

        The Internal Revenue Service recently proposed regulations that will treat premiums for corporate life insurance policies issued with certain “split-dollar” arrangements as loans to the covered employees. Under split-dollar arrangements, corporate purchasers are reimbursed for premium payments from policy proceeds. In addition, Congress recently passed the Sarbanes-Oxley Act, which contains a provision that prohibits public companies from making personal loans to directors and executives.

        Since such split-dollar arrangements may be construed to constitute loans to employees under the Sarbanes-Oxley Act, these developments may cause policies issued with these split-dollar arrangements to be less attractive and lead to withdrawals of assets, policy terminations and fewer sales of new policies. Approximately $366 million in Retirement Assets under Management are attributable to these split-dollar contracts.

Distribution

        CIGNA’s retirement products and services are distributed primarily through a salaried direct sales force, pension plan consultants and brokers, investment advisors and other service providers. As of December 31, 2002, the sales organization consisted of 22 salaried sales associates and 55 client service representatives and administrative personnel located in offices across the United States. In addition, CIGNA’s bank and broker-dealer operations offer benefit plan participants and other customers a range of IRA rollover investments and retail banking and brokerage services through 42 registered representatives. Corporate life insurance products are sold primarily through a limited number of specialty brokers.

Pricing, Reserves and Reinsurance

        Premiums for single premium annuities and corporate life insurance are based on assumptions about mortality, persistency, expenses, target profit margins, interest rates and competitive considerations. The long-term profitability of single premium annuities and corporate life insurance products is affected by the degree to which future experience deviates from these assumptions. Fees for universal life insurance products consist of mortality, administrative and surrender charges assessed against the contractholder’s fund balance. Interest credited and mortality charges for universal life, and mortality charges on variable universal life, may be adjusted prospectively to reflect expected interest and mortality experience.

        CIGNA establishes reserves for experience-rated contracts in an amount equivalent to the contractholder funds on deposit with it, adjusted for estimated investment and mortality experience. Profitability on these contracts is based primarily on margins from charges for investment and administrative services and risk assumption. For fully guaranteed contracts, the reserve established is the present value of expected future obligations based on assumptions about mortality, investment returns, expenses and target profits, with a margin for adverse

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deviation. Profitability on fully guaranteed contracts is affected by the degree to which future experience deviates from these assumptions.

        For corporate life insurance, CIGNA establishes reserves for deposits received and interest credited to the contractholder, less mortality and administrative charges assessed against the contractholder’s fund balance. In addition, CIGNA establishes loss reserves for losses incurred but not paid, based on prior claim experience.

        CIGNA reduces its exposure to large single life losses and to multiple losses arising out of a single occurrence under corporate life insurance contracts by purchasing reinsurance from unaffiliated reinsurers.

Competition

        The retirement plan marketplace is highly competitive. CIGNA’s competitors include mutual fund companies, insurance companies, banks, investment advisors, and certain service and professional organizations. Competition focuses on service, technology, cost, variety of investment options, investment performance and financial strength, as indicated for CIGNA’s retirement business by ratings of CG Life by nationally recognized rating agencies.

        The largest single retirement plan manager holds a 7% market share, as measured by assets under management. Based on a survey published in “Pensions & Investments,” CIGNA ranked 35th among retirement plan managers overall, in terms of pension and employee retirement savings plan assets under management.

        CIGNA ranked 15th overall in terms of 401(k) plan assets under management according to a separate survey published in “Pensions & Investments.” As of December 31, 2002, 401(k) plan assets constituted approximately 81% of CIGNA’s defined contribution assets under management, and 43% of Retirement Assets under Management.

        The corporate life insurance marketplace is also highly competitive. CIGNA principally competes with a significant number of the largest domestic life insurance companies that may offer one or more corporate life insurance products. Competition in this market focuses primarily on product design, underwriting, price, administrative servicing capabilities and insurer financial strength, as indicated by ratings issued by nationally recognized agencies.

        For more information concerning insurance ratings, see Section J “Ratings” on page 41 and the discussion of Ratings in the MD&A section of the Annual Report.

Technology

        CIGNA’s Employee Retirement Benefits and Investment Services businesses are highly dependent on automated systems and systems applications. These businesses have worked to improve their system infrastructure. In addition, CIGNA has developed integrated offerings across its retirement services products. These offerings include Internet access to retirement account information, self-service advisory and financial planning capabilities and integrated financial statements. These offerings are available on the myCIGNA.com consumer portal, which provides personalized web pages to customers. CIGNA implemented the portal in 2002. The portal also offers access to health care information, which is described in Section C “Employee Health Care, Life and Disability Benefits” on page 5.

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E. International Life, Health and Employee Benefits

Principal Products and Markets

        CIGNA’s international life, health and employee benefits operations (“International”) provide various coverages, products and services in selected markets outside the United States, including Asia (principally Korea, Hong Kong and Taiwan), Europe (principally the United Kingdom and Spain), and Latin America. In addition, CIGNA provides group benefits products in numerous U.S. and non-U.S. markets for expatriate employees of multinational companies.

        The coverages, products and services of this segment, which are provided by subsidiaries of CIGNA Corporation, include individual and group life, accident and health, health care, and pension products.

        The following table sets forth the principal lines of business of this segment and their related net earned premiums and fees:

	Year Ended December 31,
	2002		2001		2000
	(In millions)
Health Care	$	456	$	446	$	401
Life, Accident and Health		355		342		290
Subtotal		811		788		691
Japanese Life Operation:(1)
Individual Life		-		-		813
Individual Health		-		-		538
Subtotal		-		-		1,351
Total Premiums and Fees	$	811	$	788	$	2,042

_________________

(1) Beginning in 2001, CIGNA stopped consolidating the premiums and fees from the Japanese life insurance operation because CIGNA’s ownership interest dropped to 40% in January 2001. CIGNA sold its remaining interest in the Japanese life insurance operation to Sompo Japan Insurance, Inc. (formerly Yasuda Fire & Marine Insurance Company, Ltd.) in November 2001. For additional information, see Note 4(C) to CIGNA’s 2002 Financial Statements included in its Annual Report.

        Life, accident and health products are designed to meet the insurance, savings and investment needs of consumers outside of U.S. insurance markets. These products are marketed on both group and individual bases. Traditional life insurance products include term, whole life, endowment and products with variable investment returns. Supplemental products include accidental death, medical, hospitalization, dread disease and cancer coverages.

        The health care products of the International segment are primarily indemnity insurance coverages, with some products having managed care or administrative service aspects. These products provide government-mandated medical benefits in some markets and offer an alternative or supplement to governmental programs in others. Health care includes life and medical insurance products that are provided through group benefit programs as well as medical insurance products that are marketed directly to individuals.

        Health care also includes global group benefits products for employees of multinational companies (primarily U.S. and U.K. multinational companies) who work outside of their country of citizenship. This product group includes medical, dental, vision, life, accidental death and dismemberment and disability coverages, as

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well as primary medical and dental benefits for international travelers.

        CIGNA has established representative offices in China to facilitate the development of profitable business opportunities. CIGNA received formal approval to enter the Chinese life insurance market from the China Insurance Regulatory Commission in September 2002 and entered a joint venture to begin life insurance operations in China in 2003. CIGNA has also established joint venture operations in Japan to participate in its pension market.

        Following a strategic review, International concluded that CIGNA’s growth potential in Brazil’s private health care and pension markets did not meet its long-term business goals. In January 2003, CIGNA sold its Brazilian health care operation and entered an agreement to sell its Brazilian pension operation. For more information, see “Recent Transactions” on page 3, “Acquisitions and Dispositions” in the MD&A section of, and Note 4 to CIGNA’s 2002 Financial Statements included in its Annual Report.

        CIGNA intends to continue pursuing international growth through acquisitions, joint ventures and other investments. This strategy will result in additional start-up costs which could result in initial losses.

        CIGNA generally conducts its international businesses through foreign operating entities that maintain assets and liabilities in local currencies, which reduces the exposure to economic loss resulting from unfavorable exchange rate movements. For information on the effect of foreign exchange exposure, see “Market Risk of Financial Instruments” in the MD&A section of, and Notes 2(Q) and 20 to CIGNA’s 2002 Financial Statements included in its Annual Report.

        In 2003, International expects continued emphasis on its life, accident and health products as well as its global group benefits products. International also expects enhanced focus on potential growth markets, including Europe and Asia.

Distribution

        International distributes its products through a combination of independent agents, agents of strategic partners, financial institutions and various direct marketing channels. Life, accident and health products are primarily distributed through direct marketing, including telemarketing and direct mail under a variety of sponsored arrangements; the Internet; and agents and financial institutions. Health care products are distributed through independent brokers and agents as well as the company’s own sales personnel.

Pricing, Reserves and Reinsurance

        Premiums for life, accident and health insurance products are based on assumptions about mortality, morbidity, persistency, expenses and target profit margins, as well as interest rates and competitive considerations. The profitability of these products is affected by the degree to which future experience deviates from these assumptions.

        Premiums and fees for health care products reflect assumptions about future claims, expenses, investment returns, competitive considerations and profit margins. For products using networks of contracted providers, premiums reflect assumptions about the impact of provider contracts and utilization management on future claims. Most of the premium volume for the medical indemnity business is on a guaranteed cost basis. Other premiums are established on an experience-rated basis. Most contracts permit rate changes at least annually.

        The profitability of health care products is dependent upon the accuracy of projections for health care inflation (unit cost and utilization), the adequacy of fees charged for administration and risk assumption and, in the case of managed care products, effective medical cost management.

        Fees for variable universal life insurance products consist of mortality, administrative and surrender charges assessed against the contractholder’s fund balance. Interest

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credited and mortality charges on variable universal life may be adjusted prospectively to reflect expected interest and mortality experience.

        In addition to paying current benefits and expenses, CIGNA establishes reserves in amounts estimated to be sufficient to settle reported claims not yet paid, as well as claims incurred but not yet reported. Additionally, for individual life insurance products, CIGNA establishes policy reserves that reflect the present value of expected future obligations less the present value of expected future premiums. For variable universal life, CIGNA establishes reserves for deposits received and income credited less mortality and administrative charges assessed against the contractholder’s fund balance.

        CIGNA reduces its exposure to large and/or multiple losses arising out of a single occurrence by purchasing reinsurance from unaffiliated reinsurers.

Competition

        The principal competitive factors that affect International are underwriting and pricing, relative operating efficiency, relative effectiveness in medical cost management, quality of provider networks and relationships, product innovation and differentiation, distribution methodologies and producer relations, and the quality of claims and policyholder services. In most overseas markets, perception of financial strength is also an important competitive factor.

        International’s primary competitors include U.S.-based companies with global operations, as well as other, non-U.S., global carriers and indigenous companies in regional and local markets. For the life, accident and health lines of business, locally based competitors are primarily indigenous life insurance companies, but also include financial institutions and insurance subsidiaries of banks. CIGNA expects that the competitive environment will intensify as U.S. and Europe-based insurance and financial services providers pursue global expansion opportunities.

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F. Run-off Reinsurance Operations

Principal Products and Markets

        Until June of 2000, CIGNA offered reinsurance coverage for part or all of the risks written by other insurance companies under life and annuity policies (both group and individual); accident policies (personal accident, catastrophe and workers’ compensation coverages); and health policies. These products were sold principally in North America and Europe through a small sales force and through intermediaries.

Premiums and Fees
(In millions)

	2002	2001	2000
Life	$84	$93	$116
Personal Accident	52	51	237
Health	2	4	12
Total Premiums and Fees	$138	$148	$365

        As of June 1, 2000, CIGNA sold its U.S. individual life, group life and accidental death reinsurance business for cash proceeds of approximately $170 million. The sale generated an after-tax gain of approximately $85 million, but recognition of that gain was deferred because the sale was structured as an indemnity reinsurance arrangement. During 2001 and 2002, the acquirer entered into agreements with most of the reinsured parties, relieving CIGNA of any remaining obligations to those parties. As a result, CIGNA accelerated the recognition of most of the deferred gain in 2001. For additional discussion, see “Acquisitions and Dispositions” in the MD&A section of, and Note 4 to CIGNA’s 2002 Financial Statements included in its Annual Report.

        CIGNA placed its remaining reinsurance businesses (including its accident, domestic health, international life and health, and specialty life reinsurance businesses) into run-off as of June 1, 2000, and stopped underwriting new reinsurance business. For the run-off reinsurance business, CIGNA has established policy reserves that reflect the present value of expected future obligations less the present value of expected premiums. In addition, CIGNA establishes loss reserves for claims received but not yet paid, based on the amount of the claim received, and for losses incurred but not reported, based on prior claim experience.

Specialty Life Reinsurance Contracts

        The reinsurance operations reinsured a guaranteed minimum death benefit under certain variable annuities issued by other insurance companies. These variable annuities are essentially investments in mutual funds combined with a death benefit.

        In 2002, CIGNA recognized an after-tax charge of $720 million ($1.1 billion pre-tax) to strengthen reserves related to these guaranteed minimum death benefits and the adoption of a program to substantially reduce equity market risks related to these contracts.

        The purpose of this program is to substantially reduce the adverse effects of potential future domestic and international stock market declines on CIGNA’s liabilities for these contracts, as increases in liabilities under the contracts from a declining market will be substantially offset by gains on the futures contracts. A consequence of this program is that it also substantially reduces the positive effects of potential future equity market increases, as reductions in liabilities under these contracts from improved equity market conditions will be substantially offset by losses on the futures contracts.

        In order to achieve the objective of this program, CIGNA expects to adjust its futures contract position and possibly enter into other positions over time to reflect changing equity market levels and changes in the investment mix of the underlying variable annuity investments.

        CIGNA had reserves for these liabilities of approximately $1.4 billion as of December 31, 2002, and approximately $300 million as of December 31, 2001.

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        Management estimates reserves for variable annuity death benefit exposure based on assumptions and other considerations, including lapse, partial surrender, mortality, interest rates and volatility. These are based on CIGNA’s experience and future expectations. CIGNA monitors actual experience to update these reserve estimates as necessary.

        Lapse refers to the full surrender of an annuity prior to an annuitant’s death. Volatility refers to market volatility that affects the costs of the investment program adopted by CIGNA to reduce equity market risks associated with these liabilities.

        Partial surrender refers to the fact that most annuitants have the ability to withdraw substantially all of their mutual fund investments while retaining any available death benefit coverage in effect at the time of the withdrawal. A very small percentage of annuitants have elected partial surrenders to date. An increase in CIGNA’s liabilities for variable annuity death benefits due to partial surrenders would depend on many factors, including financial market conditions prior to surrender and annuitant behavior.

        The determination of reserves for variable annuity death benefits requires CIGNA to make critical accounting estimates, as discussed further in “Other Matters” in the MD&A section of CIGNA’s Annual Report. Management believes the current assumptions and other considerations used to estimate reserves for these liabilities are appropriate. However, if actual experience differs from the assumptions and other considerations (including lapse, partial surrender, mortality, interest rates and volatility) used in estimating these reserves, the resulting change could have a material adverse effect on CIGNA’s results of operations, and in certain situations, could have a material adverse effect on CIGNA’s financial condition.

        As of December 31, 2002, the aggregate fair value of the underlying mutual fund investments of the variable annuities guaranteed by CIGNA was approximately $50 billion. The death benefit coverage in force as of that date (representing the amount that CIGNA would have to pay if all 1.5 million annuitants had died on that date) was approximately $23.4 billion. The death benefit coverage in force represents the excess of the guaranteed benefit amount over the fair value of the underlying mutual fund investments. The notional amount of the futures contract positions held by CIGNA at December 31, 2002, was $2.2 billion.

        The reinsurance operations also wrote reinsurance contracts with issuers of variable annuity contracts that provide annuitants with certain guarantees related to minimum income benefits. When annuitants elect to receive these minimum income benefits, CIGNA may be required to make payments based on changes in underlying mutual fund values and interest rates. CIGNA has purchased reinsurance from third parties, which covers 80% of the exposures of these contracts.

        CIGNA estimates the fair value of the assets and liabilities associated with these contracts using assumptions as to equity market returns, volatility of the underlying equity and bond mutual fund investments, interest rates, mortality, annuity election rates and policy surrenders. As of December 31, 2002, CIGNA had liabilities of $95 million related to these contracts and amounts recoverable from reinsurers of $76 million. CIGNA has an additional liability of $44 million associated with the cost of reinsurance.

        For additional discussion, see “Other Matters” under “Run-off Reinsurance Operations” and “Speciality Life Reinsurance Contracts” in the MD&A section of, and Note 3 to CIGNA’s 2002 Financial Statements included in its Annual Report.

Unicover and Other Run-off Reinsurance

        The Run-off Reinsurance Operations participate in a workers’ compensation reinsurance pool, which ceased accepting new risks in early 1999. This pool was formerly managed by Unicover Managers, Inc. Certain disputes over reinsurance coverage for the

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pool were resolved by an arbitration ruling issued in October 2002, which was further clarified in January 2003.

        The Run-off Reinsurance Operations include other workers’ compensation reinsurance contracts, as well as personal accident reinsurance contracts, including contracts assumed in the London market. CIGNA obtained reinsurance coverage in the London market for a significant portion of the claims under these contracts. Some of these London market retrocessionaires have disputed the validity of their contracts with CIGNA and arbitration over some of these disputes has commenced.

        Based on the outcome of the Unicover arbitration in October 2002, as well as a review of other workers’ compensation and personal accident reinsurance exposures for the run-off reinsurance operations, including an assessment of London market retrocessional disputes and workers’ compensation and personal accident reinsurance exposures, CIGNA recorded an after-tax charge of $317 million ($408 million pre-tax) in the third quarter of 2002.

        The London market retrocessional disputes are not expected to be resolved for some time. In addition, unfavorable claims experience related to workers’ compensation and personal accident exposures is possible and could result in future losses, including losses attributable to the inability to recover amounts from retrocessionaires (either due to disputes with the retrocessionaires or their financial condition).

        CIGNA’s reserves for amounts recoverable from retrocessionaires, as well as for reserves for liabilities associated with underlying reinsurance exposures assumed by CIGNA, are considered appropriate as of December 31, 2002, based on current information. However, it is possible that future developments regarding these matters could result in a material adverse effect on CIGNA’s consolidated results of operations, and, in certain situations, could have a material adverse effect on CIGNA’s financial condition.

        For more information see “Run-off Reinsurance Operations” and “Other Matters” in the MD&A section of, and Notes 3 and 21(D) to CIGNA’s 2002 Financial Statements included in its Annual Report.

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G.   Other Operations

        Other Operations consists of:

• deferred gains recognized from the 1998 sale of the individual life insurance and annuity business;

• corporate life insurance on which policy loans are outstanding (“leveraged corporate life insurance”);

• settlement annuity business; and

• certain investment management services initiatives.

        The products and services related to these operations are offered by subsidiaries of CIGNA Corporation.

        CIGNA sold its individual life insurance and annuity business in 1998. A portion of the gain was deferred because the principal agreement to sell this business was an indemnity reinsurance arrangement. The deferred portion is being recognized at the rate that earnings from the sold business would have been expected to emerge, primarily over 15 years on a declining basis. Because it was an indemnity reinsurance transaction, CIGNA is not relieved of liability for the reinsured business. See “Other Operations” in the MD&A section of, and Note 4 to CIGNA’s 2002 Financial Statements included in its Annual Report.

        In 1996, Congress passed legislation implementing a three-year phase-out period for tax deductibility of policy loan interest for most leveraged corporate life insurance products. The legislation has adversely affected premiums and earnings of CIGNA’s leveraged corporate life insurance business. No new policies have been sold since 1997.

        In 2001, the Internal Revenue Service (“IRS”) implemented an initiative for leveraged corporate life insurance plans purchased after June 20, 1986, that permits policyholders to settle tax disputes related to these plans. Management expects that some customers will accept the IRS settlement offer and surrender their policies in 2003.

        The full effect of the 1996 legislation and the 2001 IRS settlement offer on customers’ decisions to maintain these policies is uncertain. However, management expects revenues and operating income associated with these products to decline. For additional information on the impact of the legislation, see “Other Operations” in the MD&A section of CIGNA’s Annual Report.

        CIGNA’s settlement annuity business is a run-off block of contracts. These contracts are primarily liability settlements with the majority of payments guaranteed and not contingent on survivorship.

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H. Investments and Investment Income

        CIGNA’s investment operations provide investment management and related services in the United States and certain other countries for CIGNA’s corporate and insurance-related invested assets and for group pension plan sponsors, institutions, international investors and individual investors. CIGNA acquires or originates, directly or through intermediaries, various investments including private placements, public securities, mortgage loans, real estate and short-term investments. CIGNA’s investment operations also develop structured investment products. The products and services for CIGNA’s investment operations are provided by CIGNA subsidiaries.

        As shown in the chart below, CIGNA’s assets under management at December 31, 2002 totaled $82.0 billion. These assets consist of the following:

• Invested Assets. These include the insurance and retirement-related assets that CIGNA holds in the General Account and other corporate invested assets.

• Advisory Portfolio Assets. These include:

• Separate Account Assets, which are contractholder funds maintained in accounts with specific investment objectives, principally for CIGNA’s defined contribution and defined benefit customers. Although Separate Account Assets are separately presented on CIGNA’s balance sheet, the investment income, gains and losses on Separate Accounts generally accrue to the contractholders and are not included in CIGNA’s revenues and expenses.

• Third Party Account Assets, which are customer assets that CIGNA manages, but for which the customer retains title. These assets are not reflected in CIGNA’s balance sheet, and investment income, gains and losses are excluded from CIGNA’s revenues and expenses.

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ASSETS UNDER MANAGEMENT DECEMBER 31, 2002 (In millions)
Invested Assets
Employee Health Care, Life and Disability Benefits	$	8,352
Employee Retirement Benefits and Investment Services		24,698
International Life, Health and Employee Benefits		848
Run-Off Reinsurance Operations		1,356
Other Operations		5,106
Corporate		2
Total Invested Assets					$	40,362
Advisory Portfolio Assets
Separate Accounts
Employee Health Care, Life and Disability Benefits		1,250
Employee Retirement Benefits and Investment              Services		28,513
International Life, Health and Employee Benefits		172
Other Operations		1,320
Total Separate Accounts			$	31,255
Third Party Accounts (1)
ACE Limited (2)		2,436
Other Third Party Accounts (3)		7,985
Total Third Party Accounts				10,421
Total Advisory Portfolio Assets						41,676
Total Assets Under Management					$	82,038

_________________

(1) Amounts in Third Party Accounts are not included in CIGNA’s Consolidated Balance Sheets.

(2) These assets were transferred by CIGNA to ACE Limited in 1999 in connection with the sale of CIGNA’s property and casualty business, but continue to be managed by CIGNA.

(3) Includes investment advisory assets managed by the Employee Retirement Benefits and Investment Services segment.

        Assets under management for CIGNA include $53.8 billion in assets under management for the Employee Retirement Benefits and Investment Services segment. For additional information about the assets under management for that segment, and additional information about General and Separate Accounts, see Section D “Employee Retirement Benefits and Investment Services—Principal Products and Markets” on page 17.

        CIGNA’s investment operations directly manage substantially all of the Invested Assets. CIGNA manages a portion of the Advisory Portfolio Assets directly and a portion through Sub-advisory Arrangements. Third-party retail mutual fund managers also manage a portion of the Advisory Portfolio Assets in Independent Funds. The table below shows the percentage of Advisory Portfolio Assets managed through each of these methods as of December 31:

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	2002	2001
Direct	56%	59%
Sub-advisory	15%	13%
Independent	29%	28%

Types of Investments

        CIGNA invests in a broad range of asset classes, including domestic and international fixed maturities and common stocks, mortgage loans, real estate and short-term investments. Fixed maturity investments include publicly traded and private placement corporate bonds, government bonds, publicly traded and private placement asset-backed securities, and redeemable preferred stocks. CIGNA’s investment in asset-backed securities includes investments in collateralized mortgage obligations (“CMOs”) and collateralized debt obligations. CIGNA’s CMO holdings are concentrated in securities with limited prepayment, extension and default risk. For additional information about asset-backed securities, see “Investment Assets” in the MD&A section of CIGNA’s Annual Report.

Domestic Employee Benefits Investments

        The major portfolios under management in CIGNA’s General Account consist of the combined assets of the Employee Health Care, Life and Disability Benefits segment, the Employee Retirement Benefits and Investment Services segment, the Run-off Reinsurance Operations segment and Other Operations (collectively, “Domestic Employee Benefits portfolios”). CIGNA generally manages the characteristics of these assets to reflect the underlying characteristics of related insurance and contractholder liabilities, as well as regulatory and tax considerations pertaining to those liabilities. CIGNA’s domestic insurance and contractholder liabilities as of December 31, 2002, excluding liabilities of businesses sold through use of reinsurance, were associated with the following products: experience-rated pension, 47%; fully guaranteed investment and annuity, 17%; interest-sensitive life insurance, 14%; and other life and health, 22%. These products, and the investment assets supporting them, are described below.

        Experience-rated pension products primarily consist of defined benefit and defined contribution pension products. Investments for these products are selected to support the yield and liquidity needs of the products and are principally fixed income investments.

        Fully guaranteed products primarily include guaranteed investment contracts (“GICs”), single premium annuity products and settlement annuities. Because these products generally do not permit withdrawal by policyholders prior to maturity, the amount and timing of future benefit cash flows can be reasonably estimated. Funds supporting these products are invested in fixed income investments that generally match the aggregate duration of the investment portfolio with that of the related benefit cash flows. As of December 31, 2002, the duration of assets and liabilities was approximately 3 years for GICs, 7 years for single premium annuities, and 12 years for settlement annuities.

        Interest-sensitive products primarily consist of corporate life insurance products. Invested assets supporting these products are primarily fixed income investments and policy loans. Fixed income investments emphasize investment yield while meeting the liquidity requirements of the related liabilities.

        Other life and health insurance products consist of various group and individual life, health and disability insurance products. The supporting invested assets are structured to emphasize investment income, and the necessary liquidity is provided through cash flow, short-term investments and public securities. Assets supporting longer-term group disability insurance benefits and group life waiver of premium benefits are generally managed to an aggregate duration similar to that of the related benefit cash flows.

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Investment Strategy

        Investment strategy and results are affected by the amount and timing of cash available for investment, competition for investments (especially in private asset classes), economic conditions, interest rates and asset allocation decisions.

        CIGNA routinely monitors and evaluates the status of its investments in light of current economic conditions, trends in capital markets and other factors. Such factors include industry sector considerations for fixed maturity investments, and geographic and property-type considerations for mortgage loan and real estate investments. Most international fixed maturity investments are government-backed.

Fixed Maturities

        CIGNA’s fixed maturity investments, including policyholder share, as of December 31, 2002, constituted 68% of the Domestic Employee Benefits portfolios. As of that date, approximately 48% of fixed maturity investments was attributable to experience-rated pension contracts. CIGNA invests primarily in investment grade fixed maturities rated by rating agencies (for public investments), by CIGNA (for private investments) or by the Securities Valuation Office of the National Association of Insurance Commissioners (for both public and private investments). For information about below investment grade holdings, see “Investment Assets” in the MD&A section of CIGNA’s Annual Report.

Mortgages and Real Estate

        CIGNA’s mortgage loan investments, including policyholder share, constituted 22% of the Domestic Employee Benefits portfolios as of December 31, 2002. As of that date, approximately 56% of mortgage loan investments was attributable to experience-rated pension contracts. Mortgage loan investments are subject to underwriting criteria addressing loan-to-value ratio, debt service coverage, cash flow, tenant quality, leasing, market, location and borrower’s financial strength. Such investments consist primarily of first mortgage loans on commercial properties and are diversified by property type, location and borrower. CIGNA invests in fully completed and substantially leased commercial properties. Virtually all of CIGNA’s mortgage loans are bullet or balloon payment loans, under which all or a substantial portion of the loan principal is due at the end of the loan term.

        CIGNA’s real estate investments, including policyholder share, constituted 1% of the Domestic Employee Benefits portfolios as of December 31, 2002. As of that date, 54% of real estate investments was attributable to experience-rated pension contracts.

        Real estate investments purchased by CIGNA are actively managed to maximize operating income. These investments consist primarily of stabilized commercial properties and are diversified relative to property type and location. CIGNA also acquires real estate through foreclosure of mortgage loans. CIGNA rehabilitates, re-leases and sells foreclosed properties, a process that usually takes from two to four years unless management considers a near-term sale preferable. CIGNA sold $78 million of foreclosed properties in 2002 and $88 million in 2001 and expects to sell additional foreclosed properties in 2003.

Derivative Instruments

        CIGNA generally uses derivative financial instruments to minimize its exposure to certain market risks. CIGNA has also written derivative instruments to minimize insurance customers’ market risks. For information about CIGNA’s use of derivative financial instruments, see Notes 2(B) and 7(G) to CIGNA’s 2002 Financial Statements included in its Annual Report.

        See “Investment Assets” in the MD&A section of, and Notes 2, 7, 8 and 9 to CIGNA’s 2002 Financial Statements included in its Annual Report for additional information about CIGNA’s investments.

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        The following tables summarize the distribution of investments attributable to CIGNA’s Domestic Employee Benefits portfolios and the related net investment income from such investments. Approximately 49% of the investments in the Domestic Employee Benefits portfolios is attributable to experience-rated pension contracts with policyholders.

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Domestic Employee Benefits Investments	As of December 31,
	2002		2001		2000
	(In millions)
Fixed maturities:
Bonds:
Consumer products	$	3,949	$	3,729	$	2,684
Manufacturing		2,848		2,401		2,303
Finance		3,948		2,936		2,467
Energy		2,603		2,290		2,204
Public utilities		1,761		1,606		1,530
States, municipalities and political         subdivisions		1,761		1,596		1,555
Transportation		1,321		1,277		1,258
U.S. government and government         agencies and authorities		1,196		487		777
Foreign governments(1)		391		338		306
Other		937		613		394
Total bonds		20,715		17,273		15,478
Asset-backed securities:
United States government agencies,          mortgage-backed		1,669		627		511
Other mortgage-backed		2,265		2,344		2,132
Other asset-backed		2,290		2,515		3,190
Redeemable preferred stocks		90		26		2
Total fixed maturities		27,029		22,785		21,313
Equity securities:
Common stocks:
Industrial and miscellaneous		232		325		430
Banks, trust and insurance companies		23		30		48
Public utilities		5		10		16
Total common stocks		260		365		494
Non-redeemable preferred stocks		6		12		19
Total equity securities		266		377		513
Mortgage loans:
Commercial:
Office buildings		3,749		4,086		4,127
Retail facilities		2,292		3,091		3,069
Apartments		1,177		1,313		1,262
Industrial		740		704		592
Hotels		592		544		599
Other		179		182		118
Total mortgages		8,729		9,920		9,767
Policy loans		2,399		2,766		2,924
Real estate		253		430		525
Other long-term investments		787		1,178		1,001
Short-term investments		49		26		119
Total investments	$	39,512	$	37,482	$	36,162

_________________
These amounts do not include Separate Account assets. See Note 2(D) to the Financial Statements of CIGNA’s Annual Report for a discussion of the method of valuation of investments.
(1) Comprises fixed maturities of sovereign foreign governments.

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Net Investment Income for Domestic Employee Benefits Investments	Year ended December 31,
		2002			2001			2000
		(In millions)
Fixed maturities		$	1,723		$	1,676		$	1,637
Equity securities			8			9			10
Mortgage loans			707			772			773
Policy loans			177			208			201
Real estate			62			94			113
Other investments			66			101			119
Total			2,743			2,860			2,853
Less investment expenses			83			91			110
Net investment income, pre-tax		$	2,660			2,769		$	2,743
Net investment yield(1)			7.05	%		7.58	%		7.80	%

_________________

(1) The net investment yield is equal to (a) net investment income multiplied by two, divided by (b) the sum, at the beginning and end of the year, of cash, invested assets (at cost or amortized cost less impairments) and investment income due and accrued, less borrowed money, less net investment income.

International Employee Benefits and Corporate Investments

In addition to the Domestic Employee Benefits portfolios, CIGNA has a portfolio for CIGNA’s International Life, Health and Employee Benefits segment (“International”). Invested assets for International and unallocated corporate investments totaled $850 million as of December 31, 2002, $779 million as of December 31, 2001 and $3.6 billion as of December 31, 2000. Investments include U.S. and international fixed maturities, policy loans, mortgage loans and short-term investments. Net investment income from these investments and from cash and cash equivalents was $56 million for 2002, $73 million for 2001 and $197 million for 2000.

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I. Regulation

        CIGNA’s subsidiaries, depending on the type and location of their business activities, may be subject to federal, state and foreign regulation. CIGNA’s insurance subsidiaries and HMOs are licensed to do business in, and are subject to regulation and supervision by, state regulatory authorities as well as authorities in the District of Columbia, certain U.S. territories and various foreign jurisdictions.

        The extent of regulation of insurance subsidiaries and HMOs varies. Licensing of insurers, HMOs and their agents and the approval of coverage and provider contract forms is usually required.

        Most jurisdictions have laws and regulations governing rates, solvency, standards of conduct and various insurance and investment products. States often regulate standards for HMO quality assurance programs, minimum levels of benefits that must be offered and requirements for availability and continuity of care. Increasingly, states also are regulating the relationship between HMOs and their contracted providers, and are requiring submission of reports on medical utilization and other matters for managed care products. Most states have enacted laws requiring the payment of interest on claims paid late and state regulators have recently begun imposing substantial penalties for late payment even where interest is properly paid on late claim payments.

        The form and content of statutory financial statements and the type and concentration of investments are also regulated. Each insurance and HMO subsidiary is required to file periodic financial reports with supervisory agencies in most of the jurisdictions in which it does business, and its operations and accounts are subject to examination by such agencies at regular intervals.

        Insurance risk selection is a concern of regulators. For example, some states have imposed restrictions on the use of underwriting criteria related to AIDS, domestic abuse and credit reports. Also, various interpretations under the Americans with Disabilities Act may affect the provision of insurance benefits under certain types of policies.

        Most states and certain foreign jurisdictions require licensed insurance companies to support guaranty associations or indemnity funds, which are organized to pay claims on behalf of insolvent insurance companies. In the United States, these associations levy assessments on member insurers in a particular state to pay such claims. These assessments are levied in proportion to the member insurers’ relative shares of the lines of business that had been written by the insolvent insurer. The maximum assessment permitted by law in any one year is generally 2% of annual premiums written by each member in a particular state with respect to the categories of business involved and may be offset in some states over a five-year period against premium taxes payable.

        In addition, insurance companies are subject to a variety of assessments to fund insurance-related activities such as medical risk pools and operating expenses of state regulatory bodies. These assessments are levied on various bases, including companies’ proportionate shares of aggregate written premiums and aggregate incurred or paid losses.

        Several states also require HMOs to participate in guaranty funds, special risk pools and administrative funds. CIGNA expects additional states to consider revising their solvency standards and guaranty fund legislation to encompass HMOs. For additional information about guaranty fund and other assessments, see Note 21 to CIGNA’s 2002 Financial Statements included in its Annual Report.

        Some states require health insurers and HMOs to participate in assigned risk plans, joint underwriting authorities, pools or other residual market mechanisms to insure risks

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not acceptable under normal underwriting standards.

        The National Association of Insurance Commissioners (“NAIC”) has developed model solvency-related laws that many states have adopted. The NAIC also has developed risk-based capital rules (“RBC rules”) for life and health insurance companies and HMOs that have been adopted by many states.

        The RBC rules recommend a minimum level of capital depending on the types and quality of investments held, the types of business written and the types of liabilities maintained. Depending on the ratio of the insurer’s adjusted surplus to its risk-based capital, the insurer could be subject to various regulatory actions ranging from increased scrutiny to conservatorship.

        In addition, various foreign jurisdictions prescribe minimum surplus requirements that are based upon liquidity and reserve coverage measures. As of December 31, 2002, CIGNA’s life and health insurance and HMO subsidiaries were adequately capitalized under applicable RBC and foreign surplus rules.

        CIGNA’s insurance subsidiaries are subject to state laws regulating insurers that are subsidiaries of insurance holding companies. Under such laws, certain dividends, distributions and other transactions between an insurance subsidiary and the holding company or its other subsidiaries may require notification to, or be subject to the approval of, one or more state insurance commissioners.

        State and federal regulatory scrutiny of life and health insurance company and HMO marketing and advertising practices, including the adequacy of disclosure regarding products and their future performance, may result in increased regulation. States have responded to concerns about marketing, advertising and administration of insurance by increasing the number and frequency of market conduct examinations and imposing larger penalties for violations of laws and regulations pertaining to these functions.

        CIGNA sells its products and services to sponsors of employee health care benefit plans that are typically governed by ERISA and, therefore, may be subject to requirements imposed by ERISA on plan fiduciaries and parties in interest. New ERISA regulations affecting claims and appeals procedures were implemented in 2002 for life, accident and disability and health care claims. These regulations required significant operational changes.

        CIGNA also participates in selected markets in health care programs sponsored by the federal government, including Medicare, Medicaid and the Federal Employee Health Benefits Program. In addition, CIGNA has contractual arrangements with the federal government by which CIGNA provides claims processing and other administrative services to the government with respect to certain Medicare claims. Participation in government sponsored health care programs subjects CIGNA to a variety of federal laws and regulations and risks associated with audits conducted under the programs, including reimbursement claims as well as potential fines and penalties.

        For example, under Office of Personnel Management rules, CIGNA HMOs that contract to cover federal employees may be required to reimburse the federal government if, following an audit, it is determined that a federal employee group did not receive the benefit of a discount offered by a CIGNA HMO to one of the two groups closest in size to the federal employee group. The federal government also requires Medicare and Medicaid providers to file detailed cost reports for health care services provided. These reports may be audited in subsequent years. See Section C “Employee Health Care, Life and Disability Benefits” on page 5 for additional information about CIGNA’s participation in government health-related programs.

        The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and other federal statutes subject health care insurers and HMOs to federal regulation.

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HIPAA imposes guaranteed issuance (for groups with 50 or fewer lives), renewal and portability requirements on health care insurers.

        HIPAA, through its “Administrative Simplification” provisions, also establishes new rules to standardize the electronic transmission of data and the codes relating to enrollment, eligibility, payment of claims and coordination of benefits among insurers, providers and health care clearinghouses.

        The compliance date for implementing these electronic transaction standards and code sets has been extended to October 16, 2003 for CIGNA based on CIGNA’s submission of a compliance plan, including a work plan and implementation strategy, to the Secretary of Health and Human Services. CIGNA is required to make significant systems enhancements to implement the electronic standards and code sets.

        Regulations issued in February 2003 set standards for the security of electronic health information, and must be implemented by CIGNA by April 2005. The new regulations specify a series of administrative, technical and physical security procedures. CIGNA has implemented certain security measures and planned others in anticipation of these rules.

        Regulations pursuant to HIPAA providing standards for the assignment of a unique national identifier for health plans and providers have been proposed. Final regulations requiring a unique national identifier for employer groups must be implemented by July 2004.

        Compliance with the privacy regulations under HIPAA is required by April 2003. These regulations cover all aspects of the health care delivery system, and address the use and disclosure of individually identifiable health care information. CIGNA is implementing significant systems enhancements, training and administrative efforts as well as modifications of contracts and interactions with its customers regarding the exchange of individually identifiable health care information in order to satisfy these regulations.

        In addition, increasing numbers of federal, state and foreign lawmakers and regulators have imposed or are seeking to impose new privacy standards. These standards affect how identifiable information about individuals may be handled, used and disclosed.

        CIGNA expects federal and state legislatures to continue efforts to increase regulation of the health care industry. In addition, private litigants, particularly those represented by a coalition of plaintiffs’ lawyers who have brought proposed class action lawsuits against CIGNA and health care industry competitors, have attempted to force changes in certain operational practices of the industry. See Section C “Employee Health Care, Life and Disability Benefits” on page 5 for additional information.

        The “Gramm-Leach-Bliley Financial Modernization Act,” enacted in 1999, removed many of the restrictions on affiliations among firms in different financial services businesses, notably banking, securities and insurance. Although no significant additional competition for CIGNA’s businesses has resulted from the Act to date, it is too early to assess the Act’s long-range effects. The Act also contains provisions to protect the privacy of certain information held by insurance companies and financial institutions, and requires such companies to inform individuals of their practices in handling individually identifiable information.

        The extent of insurance regulation varies significantly among the countries in which CIGNA conducts its international operations. In many countries, foreign insurers are faced with greater restrictions than domestic competitors. These may include discriminatory licensing procedures, compulsory cessions of reinsurance, required localization of records and funds, higher premium and income taxes, and requirements

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for local participation in an insurer’s ownership.

        Depending upon their nature, CIGNA’s investment management activities and products with United States jurisdictional contacts and its broker-dealer activities are subject to U.S. federal securities laws, ERISA, and other federal and state laws governing investment-related activities and products. Investments made by United States insurance companies are subject to state insurance laws. Investment management activities and products outside the United States, and investments made by non-U.S. insurance companies outside the United States, are subject to local regulation. In many cases, the investment management activities and investments of individual insurance companies are subject to regulation by multiple jurisdictions. In addition, a CIGNA subsidiary operates a federal savings bank, which is subject to federal regulation.

        CIGNA is also subject to Presidential Executive Order 13224 which prohibits U.S. entities from doing business with persons and entities (including terrorists) on a list maintained by the Office of Foreign Asset Control.

        Federal regulation and taxation may affect CIGNA’s operations in a variety of ways. In addition to proposals discussed above related to increased regulation of the health care industry, current and proposed federal measures that may significantly affect CIGNA’s operations include pension and other employee benefit regulation, tax legislation and Social Security legislation.

        The economic and competitive effects on CIGNA’s business operations of the legislative and regulatory proposals discussed above will depend upon the final form any such legislation or regulation may take.

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J. Ratings

        CIGNA and certain of its insurance subsidiaries are rated by nationally recognized rating agencies. The significance of individual ratings varies from agency to agency. However, companies assigned ratings at the top end of the range have, in the opinion of the rating agency, the strongest capacity for repayment of debt or payment of claims, while companies at the bottom end of the range have the weakest capacity.

        Insurance ratings represent the opinions of the rating agencies on the financial strength of a company and its capacity to meet the obligations of insurance policies. The principal agencies that rate CIGNA’s insurance subsidiaries characterize their insurance rating scales as follows:

• A.M. Best Company, Inc. ("A.M. Best"), A++ to S ("Superior" to "Suspended");

• Moody's Investors Service ("Moody's"), Aaa to C ("Exceptional" to "Lowest");

• Standard & Poor's Corp. ("S&P"), AAA to R ("Extremely Strong" to "Regulatory Action"); and

• Fitch, Inc. ("Fitch"), AAA to D ("Exceptionally Strong" to "Order of Liquidation").

        As of February 28, 2003, the insurance financial strength ratings for CG Life were as follows:

	CG Life
	Insurance Ratings(1)
A.M. Best	A
	("Excellent,"
	3rd  of 16)
Moody's	A1
	("Good,"
	5th of 21)
S&P	A+
	("Strong,"
	5th of 21)
Fitch	AA-
	("Very strong,"
	4th of 24)

_________________

(1) Includes the rating assigned, the agency’s characterization of the rating and the position of the rating in the agency’s rating scale (e.g., CG Life’s rating by A.M. Best is the 3^rd highest rating awarded in its scale of 16).

        As of February 28, 2003, the insurance financial strength rating for Life Insurance Company of North America assigned by A.M. Best was A (“Excellent,” 3^rd of 16), and by Moody’s was A2 (“Good,” 6^th of 21).

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        Debt ratings are assessments of the likelihood that a company will make timely payments of principal and interest. The principal agencies that rate CIGNA’s senior debt characterize their rating scales as follows:

• Moody’s, Aaa to C (“Exceptional” to “Lowest”);

• S&P, AAA to D (“Extremely Strong” to “Default”); and

• Fitch, AAA to D (“Highest” to “Default”).

        The commercial paper rating scales for those agencies are as follows:

• Moody’s, Prime-1 to Not Prime (“Superior” to “Not Prime”);

• S&P, A-1+ to D (“Extremely Strong” to “Default”); and

• Fitch, F-1+ to D (“Very Strong” to “Distressed”).

        As of February 28, 2003, the debt ratings obtained from the following agencies were as follows:

Debt Ratings(1)     CIGNA CORPORATION
	Senior Debt	Commercial Paper
Moody's	Baa1	Prime-2
	("Adequate,"	("Strong,"
	8th of 21)	2nd of 4)
S&P	BBB+	A-2
	("Adequate,"	("Good,"
	8th of 22)	3rd of 7)
Fitch	A-	F-2
	("High,"	("Moderately Strong,"
	7th of 24)	3rd of 7)

(1) Includes the rating assigned, the agency’s characterization of the rating and the position of the rating in the applicable agency’s rating scale.

        Ratings are reviewed routinely by the rating agencies and may be changed at their discretion.

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K. Miscellaneous

        Portions of CIGNA’s insurance business are seasonal in nature. Reported claims under group health products are generally higher in the first quarter.

        CIGNA and its principal subsidiaries are not dependent on business from one or a few customers. No customer accounted for 10% or more of CIGNA’s consolidated revenues in 2002. CIGNA and its principal subsidiaries are not dependent on business from one or a few brokers or agents. In addition, CIGNA’s insurance businesses are generally not committed to accept a fixed portion of the business submitted by independent brokers and agents, and generally all such business is subject to its approval and acceptance.

        CIGNA had approximately 41,200, 44,600, and 43,200 employees as of December 31, 2002, 2001 and 2000, respectively.

Item 2. PROPERTIES

        CIGNA’s headquarters are located in approximately 50,000 square feet of leased office space at One Liberty Place, Philadelphia, Pennsylvania. CIGNA Group Insurance, CIGNA International, portions of CIGNA HealthCare and CIGNA’s staff support operations are located in leased premises of approximately 635,000 square feet at Two Liberty Place, Philadelphia. CIGNA HealthCare is the primary occupant of a complex of buildings owned by CIGNA, aggregating approximately 1.4 million square feet of office space, located at 900-950 Cottage Grove Road, Bloomfield, Connecticut. CIGNA Retirement & Investment Services leases approximately 336,000 square feet at 280 Trumbull Street, Hartford, Connecticut and approximately 35,000 square feet at Four Times Square, New York, New York. In addition, CIGNA owns or leases office buildings, or parts thereof, throughout the United States and in other countries. For additional information concerning leases and property, see Notes 2(H) and 18 to CIGNA’s 2002 Financial Statements included in its Annual Report. This paragraph does not include information on investment properties.

Item 3. LEGAL PROCEEDINGS

        Various CIGNA entities are defendants in several proposed class action lawsuits brought in federal court against the managed care industry by physicians and members of health plans. The lawsuits allege violations under one or more of the Employment Retirement Income Security Act (“ERISA”), the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and various state laws. They challenge, in general terms, the mechanisms used by managed care companies in connection with the delivery of or payment for health care services. The complaints seek injunctive relief, unspecified damages (subject, in the case of RICO, to trebling) and attorneys’ fees.

        These federal cases against the Company are Shane v. Humana, Inc., et al. (CIGNA subsidiaries added as defendants in August 2000), Mangieri v. CIGNA Corporation  (filed December 7, 1999 in the United States District Court for the Northern District of Alabama), and Pickney v. CIGNA Corporation and CIGNA Health Corporation (filed November 22, 1999, in the United States District Court for the Southern District of Mississippi). Plaintiffs in the Shane and Mangieri cases are physicians, and in the Pickney case, a health plan subscriber. These cases were transferred to the United States District Court for the Southern District of Florida, along with other cases against other managed care companies and similar cases subsequently filed against the Company in other federal courts, for consolidated pretrial proceedings.

        On September 26, 2002, the United States District Court for the Southern District of Florida denied class action certification to the health plan subscriber plaintiffs in the consolidated Pickney case, and certified a class of physician plaintiffs in the consolidated Shane and Mangieri cases. The U.S. Court of Appeals for the Eleventh Circuit has granted the defendant’s request for review of the decision to certify the physician class. The

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plaintiff’s request for reconsideration of the denial of class status to the subscriber class was denied by the district court, and the plaintiffs did not appeal.

        The Company was also a defendant in similar state court cases. On March 29, 2001, a trial judge in Madison County, Illinois certified a class of providers in Kaiser and Corrigan v. CIGNA Corporation, et al., a case alleging breach of contract and seeking increased reimbursements. An Amended Complaint in Kaiser included federal claims under ERISA and RICO, and the case was removed to federal court in Illinois, where a settlement agreement between the parties was filed on November 26, 2002. If approved, the agreement will encompass most of the claims brought on behalf of health care providers asserted in other state and federal jurisdictions, including the Shane and Mangieri cases. On February 21, 2003 the Judicial Panel for Multidistrict Litigation ordered the Illinois case to be transferred to the Florida federal court, which will decide whether the settlement should be approved. In connection with the Kaiser matter, CIGNA recognized an after-tax charge of $50 million ($77 million pre-tax) in the fourth quarter of 2002. As this matter has not been resolved, adjustments to this amount in future periods are possible.

        The Department of Justice and Office of Inspector General of the Department of Health and Human Services investigated a subsidiary of CIGNA, Lovelace Health Systems, Inc. (“Lovelace”) regarding Medicare cost reporting practices for the years 1990 through 1999. Medicare cost reports form the basis for reimbursements to Lovelace by the Centers for Medicare and Medicaid Services for Medicare covered services that Lovelace provides to eligible individuals. In 2002, CIGNA increased reserves for this matter by $9 million after-tax ($14 million pre-tax). This matter was resolved on December 4, 2002 by a settlement agreement between the parties.

        The U.S. Attorney’s Office for the Eastern District of Pennsylvania is investigating compliance with federal laws in connection with pharmaceutical companies’ marketing practices and their impact on prices paid by the government to pharmaceutical companies for products under federal health programs. As part of this investigation, CIGNA is responding to subpoenas concerning contractual relationships between pharmaceutical companies and CIGNA’s health care operations.

        On October 25, 2002, the Securities and Exchange Commission notified CIGNA that it has opened an informal inquiry into matters relating to CIGNA.

        Several purported class action lawsuits have been filed against CIGNA and certain of its officers by individuals who seek to represent a class of purchasers of CIGNA securities from May 2, 2001 to October 24, 2002. The complaints allege, among other things, that the defendants violated SEC Rule 10b-5 by misleading CIGNA shareholders with respect to the company’s performance during the class period. Another purported class action lawsuit has been filed against CIGNA and certain officers by an individual who seeks to represent a class of participants in the CIGNA 401(k) Plan who allegedly suffered losses on investments in CIGNA stock from May 2, 2001 to the present. The complaint asserts, among other things, that the same actions alleged in the shareholder suits violated ERISA. The complaints have been filed in the United States District Court for the Eastern District of Pennsylvania by the following individual plaintiffs on the dates indicated: Edward Kaminski (October 25, 2002); Jeffrey Lubin (October 29, 2002); Jean Mullin (October 29, 2002); Janis Dolan (October 31, 2002); Harvard Kolm (November 1, 2002); Joseph G. Blandford (December 6, 2002); Jeremy Schiff (December 13, 2002); and Donna Huntsman (February 4, 2003, the ERISA suit). Plaintiffs seek compensatory damages and attorneys’ fees and, in the ERISA suit, injunctive relief.

        On November 7, 2002, a purported shareholder derivative complaint nominally on behalf of CIGNA was filed in the United States District Court for the Eastern District of Pennsylvania by Evelyn Hobbs. The

44

complaint alleges breaches of fiduciary duty by CIGNA’s directors, including, among other things, their “failure to monitor, investigate and oversee Cigna’s management information system” and seeks compensatory and punitive damages. A similar complaint, filed on November 19, 2002 in the New Castle County (Delaware) Chancery Court by Jack Scott has been dismissed by the plaintiff and refiled in the United States District Court for the Eastern District of Pennsylvania so it can be consolidated with the Hobbs case and the shareholder cases.

        On December 18, 2001, Janice Amara filed a purported class action lawsuit in the United States District Court for the District of Connecticut against CIGNA Corporation and the CIGNA Pension Plan on behalf of herself and other similarly situated participants in the CIGNA Pension Plan who earned certain Plan benefits prior to 1998. The plaintiffs allege, among other things, that the Plan violated ERISA by impermissibly conditioning certain post-1997 benefit accruals on the amount of pre-1998 benefit accruals, and that these conditions are not adequately disclosed to plan participants. The plaintiffs were granted class certification on December 20, 2002, and seek equitable relief.

        CIGNA is routinely involved in numerous lawsuits and other legal matters arising, for the most part, in the ordinary course of the business of administering and insuring employee benefit programs. An increasing number of claims are being made for substantial non-economic, extra-contractual or punitive damages. The outcome of litigation and other legal matters is always uncertain, and outcomes that are not justified by the evidence can occur. CIGNA believes that it has valid defenses to the legal matters pending against it and is defending itself vigorously. Nevertheless, it is possible that resolution of one or more of the legal matters currently pending or threatened could result in losses material to CIGNA’s consolidated results of operations, liquidity or financial condition.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None.

Executive Officers of the Registrant

        All officers are elected to serve for a one-year term or until their successors are elected. Principal occupations and employment during the past five years are listed.

ANDREA ANANIA, 50, Executive Vice President, Systems, beginning February 2001; Chief Information Officer since 1998; Senior Vice President, Systems, from 1998 until February 2001; and Senior Vice President, Operations and Technology, of CIGNA Retirement and Investment Services from 1996 until 1998.

MICHAEL W. BELL, 39, Executive Vice President and Chief Financial Officer of CIGNA beginning December 2002; Chief Financial Officer-elect from October 2002 until December 2002; President of CIGNA Group Insurance from July 2000 until October 2002; and Vice President of CIGNA Corporate Accounting and Planning from February 1997 until July 2000.

H. EDWARD HANWAY, 51, Chairman of CIGNA since December 2000; Chief Executive Officer of CIGNA since January 2000; President and a Director of CIGNA since January 1999; Chief Operating Officer of CIGNA from January 1999 until January 2000; and President of CIGNA HealthCare from February 1996 until January 1999.

TERRY L. KENDALL, 56, President of CIGNA International since January 1999; Senior Vice President of CIGNA International from May 1998 until January 1999; and President and Chief Executive Officer of Golden American Life Insurance Company from September 1993 until April 1998. Golden American Life Insurance Company is a subsidiary of ING Group, a financial services company.

JOHN Y. KIM, 42, President of CIGNA Retirement and Investment Services since February 2002; President and Chief Executive

45

Officer of BondBook LLC from January 2001 until February 2002; and President and Chief Executive Officer and Chief Investment Officer of Aeltus Investment Management from October 1995 until January 2001. BondBook LLC was an electronic corporate bond trading firm. Aeltus Investment Management is an investment management subsidiary of ING Group.

DONALD M. LEVINSON, 57, Executive Vice President of CIGNA since 1988, with responsibility for Human Resources and Services.

ROBERT G. ROMASCO, 55, Executive Vice President and Chief Marketing Officer beginning February 2002; President and Chief Executive Officer of JCPenney Direct Marketing Services from January 1999 until June 2001; Senior Vice President, Corporate Marketing of American Century Investments from September 1993 to July 1998. JCPenney Direct Marketing Services is a provider of life and supplemental insurance products and consumer service programs. American Century Investments is a financial services company.

JUDITH E. SOLTZ, 56, Executive Vice President and General Counsel beginning February 2001; Senior Vice President and Associate General Counsel, 1998 until February 2001; and Vice President, Corporate Tax, 1990 until 1998.

PATRICK E. WELCH, 56, President of CIGNA HealthCare beginning May 2002; and Chairman, President and Chief Executive Officer of National Life Insurance Company from February 1997 until May 2002. National Life Insurance Company is a financial services company.

GREGORY H. WOLF, 46, President of CIGNA Group Insurance beginning October 2002; President of CIGNA Small Case Business Development from September 2001 until October 2002; Chairman and Chief Executive Officer of nextHR.com from January 2000 until July 2001; and President, Chief Executive Officer and Director of Humana, Inc. from December 1997 until August 1999. Humana, Inc. is a provider of managed health care products and services.

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The information under the caption “Quarterly Financial Data — Stock and Dividend Data” and under the caption “Stock Listing” in CIGNA’s Annual Report is incorporated by reference, as is the information from Note 11 to CIGNA’s 2002 Financial Statements and the number of shareholders of record as of December 31, 2002 under the caption “Highlights” in CIGNA’s Annual Report.

Item 6. SELECTED FINANCIAL DATA

        The five-year financial information under the caption “Highlights” in CIGNA’s Annual Report is incorporated by reference.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The information contained in the MD&A Section of CIGNA’s Annual Report is incorporated by reference.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The information under the caption “Market Risk of Financial Instruments” in the MD&A section of CIGNA’s Annual Report is incorporated by reference.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        CIGNA’s Consolidated Financial Statements and the report of its independent accountants in CIGNA’s Annual Report are incorporated by reference, as is the unaudited information set forth under the caption “Quarterly Financial Data —Consolidated Results”.

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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

A. Directors of the Registrant

        The information under the captions “Management’s nominees for terms to expire in April 2005” and “Directors who will continue in office” in CIGNA’s proxy statement to be dated on or about March 21, 2003 is incorporated by reference.

B. Executive Officers of the Registrant

        See PART I – “Executive Officers of the Registrant.”

Item 11. EXECUTIVE COMPENSATION

        The information under the captions “Executive Compensation” and “Non-employee director compensation” in CIGNA’s proxy statement to be dated on or about March 21, 2003 is incorporated by reference.

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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

        The information under the captions “Stock held by directors and executive officers as of January 31, 2003” and “Largest Security Holders” in CIGNA’s proxy statement to be dated on or about March 21, 2003 is incorporated by reference.

        The following table presents information regarding CIGNA’s equity compensation plans as of December 31, 2002:

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		14,354,000		$ 88.71		13,381,000	(1)
Equity compensation plans not approved by security holders		0		N/A		N/A	(2)
Total		14,354,000		$ 88.71		13,381,000	(1)(2)

(1) New directors of CIGNA are entitled to receive 4,500 restricted shares of CIGNA common stock, which shares do not reduce the number of shares available for future issuance under any equity compensation plan.

(2) Pursuant to the Stock Compensation Plan for Non-Employee Directors of CIGNA Corporation described below, no maximum number of shares has been authorized for issuance under this plan. In 2002, 1,100 shares were issued under this plan.

Description of Equity Compensation Plan Adopted Without Shareholder Approval

        The Stock Compensation Plan for Non-Employee Directors of CIGNA Corporation provides that at least half of each director’s annual retainer for board service must be paid in shares of CIGNA common stock or common stock equivalents. The balance of the annual retainer, and any other retainer or fee received for board service, may be paid in cash, CIGNA common stock, common stock equivalents or deferred cash compensation.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information under the caption “Transactions with affiliates” in CIGNA’s proxy statement to be dated on or about March 21, 2003 is incorporated by reference.

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Item 14. CONTROLS AND PROCEDURES

        Based on an evaluation of the effectiveness of the design and operation of CIGNA’s disclosure controls and procedures that occurred within 90 days prior to the filing of this report, CIGNA’s Chief Executive Officer and Chief Financial Officer concluded that CIGNA’s disclosure controls and procedures are an effective means of ensuring that all material information required to be disclosed in this annual report has been made known to them.

        There have been no significant changes in CIGNA’s internal controls or in other factors that could significantly affect internal controls subsequent to date of the evaluation referred to in this Item 14.

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

        A. (1) The following financial statements have been incorporated by reference from CIGNA's Annual Report:

        Consolidated Statements of Income for the years ended December 31, 2002, 2001 and 2000.

        Consolidated Balance Sheets as of December 31, 2002 and 2001.

        Consolidated Statements of Comprehensive Income and Changes in Shareholders’ Equity for the years ended December 31, 2002, 2001 and 2000.

        Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000.

        Notes to the Financial Statements.

        Report of Independent Accountants, PricewaterhouseCoopers LLP.

        (2) The financial statement schedules are listed in the Index to Financial Statement Schedules on page FS-1.

        (3) The exhibits are listed in the Index to Exhibits beginning on page E-1.

        B. During the last quarter of the fiscal year ended December 31, 2002, the registrant filed a Report on Form 8-K dated October 18, 2002 regarding a third quarter charge related to run-off reinsurance operations, a Report on Form 8-K dated October 24, 2002 preannouncing its third quarter results and revising its 2002 outlook, a Report on Form 8-K dated October 25, 2002 providing its 2003 outlook and announcing a October 28 conference call; a Report on Form 8-K dated November 1, 2002 reporting its third quarter 2002 results; a Report on Form 8-K dated November 26, 2002 announcing CIGNA HealthCare’s agreement with physicians to improve relations and end lawsuits; a Report on Form 8-K dated December 3, 2002 regarding Regulation FD disclosure; a Report on Form 8-K dated December 9, 2002 regarding Regulation FD disclosure, a Report on Form 8-K dated December 12, 2002 regarding Regulation FD disclosure, and a Report on Form 8-K dated December 20, 2002 regarding Regulation FD disclosure.

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by its undersigned, thereunto duly authorized.

Date: February 28, 2003
	CIGNA Corporation
	By: /s/ Michael W. Bell
	Michael W. Bell Executive Vice President and Chief Financial Officer (Principal Financial Officer)

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Principal Executive Officer:	Directors:*
H. Edward Hanway*	Robert H. Campbell
Chairman, Chief Executive Officer	Fred Hassan
and a Director	Peter N. Larson
	Joseph M. Magliochetti
	Joseph Neubauer
	Charles R. Shoemate
	Louis W. Sullivan, M.D.
	Harold A. Wagner
	Carol Cox Wait
	Marilyn Ware
Principal Accounting Officer:
/s/ James A. Sears
James A. Sears
Vice President and
Chief Accounting Officer
Date: February 28, 2003
	*By:
		/s/ Carol J. Ward
		Carol J. Ward
		Attorney-in-Fact
		Date: February 28, 2003

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CERTIFICATIONS

I, H. EDWARD HANWAY, certify that:

1. I have reviewed this annual report on Form 10-K of CIGNA Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: February 28, 2003
	/s/ H. Edward Hanway
	Title: Chief Executive Officer

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CERTIFICATIONS

I, MICHAEL W. BELL, certify that:

1. I have reviewed this annual report on Form 10-K of CIGNA Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: February 28, 2003
	/s/ Michael W. Bell
	Title: Chief Financial Officer

52

CIGNA CORPORATION AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENT SCHEDULES

	PAGE
Report of Independent Accountants on Financial Statement Schedules	FS-2
Schedules
I    Summary of Investments — Other Than Investments in Related Parties as of December 31, 2002	FS-3
II   Condensed Financial Information of CIGNA Corporation (Registrant)	FS-4
III  Supplementary Insurance Information	FS-10
IV  Reinsurance	FS-12
V   Valuation and Qualifying Accounts and Reserves	FS-13

        Schedules other than those listed above are omitted because they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto, which are incorporated by reference from CIGNA’s Annual Report.

FS-1

Report of Independent Accountants on
Financial Statement Schedules

To the Board of Directors
of CIGNA Corporation

Our audits of the consolidated financial statements referred to in our report dated February 6, 2003 appearing in the 2002 Annual Report to Shareholders of CIGNA Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedules listed in the index on page FS-1 of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

As discussed in Note 2 to the consolidated financial statements referred to above, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” effective January 1, 2002.

/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 6, 2003

FS-2

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE I
SUMMARY OF INVESTMENTS — OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 2002
(In millions)

Type of Investment	Cost		Fair Value		Amount at which shown in the consolidated balance sheet
Fixed maturities:
Bonds:
United States government and government
agencies and authorities	$	956	$	1,197	$	1,197
States, municipalities and political subdivisions		1,612		1,761		1,761
Foreign governments		751		825		825
Public utilities		1,708		1,761		1,761
All other corporate bonds		14,833		15,945		15,945
Asset-backed securities:
United States government agencies,
mortgage-backed		1,638		1,669		1,669
Other mortgage-backed		2,158		2,265		2,265
Other asset-backed		2,205		2,290		2,290
Redeemable preferred stocks		87		90		90
Total fixed maturities		25,948		27,803		27,803
Equity securities:
Common stocks:
Industrial, miscellaneous and all other		209		258		258
Banks, trust and insurance companies		17		25		25
Public utilities		6		6		6
Non-redeemable preferred stocks		7		6		6
Total equity securities		239		295		295
Mortgage loans on real estate		8,729				8,729
Policy loans		2,405				2,405
Real estate investments (including $94 million of
real estate acquired in satisfaction of debt)		253				253
Other long-term investments		791				791
Short-term investments		86				86
Total investments	$	38,451			$	40,362

FS-3

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION
(REGISTRANT)
STATEMENTS OF INCOME
(In millions)

	For the year ended December 31,
	2002			2001			2000
Intercompany income	$	-		$	1		$	1
Total revenues		-			1			1
Operating expenses:
Interest		120			117			102
Intercompany interest		95			176			258
Other		(4	)		24			12
Total operating expenses		211			317			372
Loss before income taxes		(211	)		(316	)		(371	)
Income tax benefit		(68	)		(98	)		(98	)
Loss of parent company		(143	)		(218	)		(273	)
Equity in income (loss) of subsidiaries from
continuing operations		(254	)		1,189			1,254
Income (loss) from continuing operations		(397	)		971			981
Income (loss) from discontinued operations		(1	)		18			6
Net income (loss)	$	(398	)	$	989		$	987

See Notes to Condensed Financial Statements on pages FS-7 and FS-8.

FS-4

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION
(REGISTRANT)
BALANCE SHEETS
(In millions)

				As of December 31,
				2002						2001
Assets:
Cash and cash equivalents				$	1					$	1
Investments in subsidiaries from continuing
operations					10,818						11,491
Other assets					443						129
Net assets of discontinued operations					125						117
Total assets				$	11,387					$	11,738
Liabilities:
Intercompany				$	4,040					$	4,463
Short-term debt					126						36
Long-term debt					1,500						1,626
Other liabilities					1,854						558
Total liabilities					7,520						6,683
Shareholders' Equity:
Common stock (shares issued, 273; 271)					68						68
Additional paid-in capital					3,212						3,093
Net unrealized appreciation -- fixed maturities	$	512					$	189
Net unrealized appreciation -- equity securities		26						50
Net unrealized appreciation -- derivatives		6						10
Net translation of foreign currencies		(32	)					(26	)
Minimum pension liability adjustment		(714	)					(76	)
Accumulated other comprehensive income
(loss)					(202	)					147
Retained earnings					9,299						9,882
Less treasury stock, at cost					(8,510	)					(8,135	)
Total shareholders' equity					3,867						5,055
Total liabilities and shareholders' equity				$	11,387					$	11,738

See Notes to Condensed Financial Statements on pages FS-7 and FS-8.

FS-5

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION
(REGISTRANT)
STATEMENTS OF CASH FLOWS
(In millions)

	For the year ended December 31,
	2002			2001			2000
Cash Flows from Operating Activities:
Income (loss) from continuing operations	$	(397	)	$	971		$	981
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by operating activities:
Equity in (income) loss of subsidiaries - continuing
operations		254			(1,189	)		(1,254	)
Dividends received from subsidiaries - continuing
operations		700			874			906
Other liabilities		345			250			-
Other, net		14			(50	)		14
Net cash provided by operating activities of
continuing operations		916			856			647
Cash Flows from Investing Activities:
Capital contributions to subsidiaries - continuing
operations		-			(6	)		-
Other, net		15			11			-
Net cash provided by investing activities of
continuing operations		15			5			-
Cash Flows from Financing Activities:
Net change in intercompany debt		(423	)		82			1,230
Issuance of long-term debt		-			493			-
Repayment of long-term debt		(36	)		(145	)		(53	)
Repurchase of common stock		(355	)		(1,139	)		(1,696	)
Issuance of common stock		68			38			72
Common dividends paid		(185	)		(190	)		(200	)
Net cash used in financing activities of
continuing operations		(931	)		(861	)		(647	)
Net increase in cash and cash equivalents		-			-			-
Cash and cash equivalents, beginning of year		1			1			1
Cash and cash equivalents, end of year	$	1		$	1		$	1

See Notes to Condensed Financial Statements on pages FS-7 and FS-8.

FS-6

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION
(REGISTRANT)

NOTES TO CONDENSED FINANCIAL STATEMENTS

        The accompanying condensed financial statements should be read in conjunction with the Consolidated Financial Statements and the accompanying notes thereto in the Annual Report.

Note 1— For purposes of these condensed financial statements, CIGNA Corporation’s wholly owned subsidiaries are recorded using the equity basis of accounting.

Note 2— Short-term and long-term debt consisted of the following at December 31:

(In millions)		2002		2001
Short-term
Current maturities of long-term debt		126		36
Total short-term debt	$	126	$	36
Long-term
Uncollateralized debt:
7.4% Notes due 2003	$	--	$	100
6 3/8% Notes due 2006		100		100
7.4% Notes due 2007		300		300
8 1/4% Notes due 2007		100		100
7% Notes due 2011		250		250
6.375% Notes due 2011		250		250
7.65% Notes due 2023		100		100
8.3% Notes due 2023		17		17
7 7/8% Debentures due 2027		300		300
8.3% Step Down Notes due 2033		83		83
Medium-term Notes		--		26
Total long-term debt	$	1,500	$	1,626

CIGNA Corporation’s medium-term notes have original maturity dates ranging from approximately eight to ten years, and interest rates ranging from 6.6% to 8.0%. The weighted average interest rate on CIGNA’s outstanding medium-term notes was 7.5% at December 31, 2002 and 7.3% at December 31, 2001.

CIGNA Corporation issued the following debt securities in 2001:

• $250 million of 7% notes due in 2011, issued in January;

• $250 million of 6.375% notes due in 2011, issued in October.

As of December 31, 2002, CIGNA Corporation had $500 million remaining under an effective shelf registration statement filed with the Securities and Exchange Commission, which may be issued as debt securities, equity securities or both.

FS-7

Maturities of long-term debt are as follows (in millions): $126 in 2003, none in 2004 and 2005, $100 in 2006, $400 in 2007, and the remainder in years after 2007.

Interest paid on short- and long-term debt amounted to $120 million, $109 million and $103 million for 2002, 2001 and 2000, respectively.

Note 3— As of December 31, 2002, CIGNA Corporation had guarantees and similar agreements in place to secure payment obligations or solvency requirements of certain wholly owned subsidiaries as follows:

• In March 2002, CIGNA Corporation entered into a syndicated bank letter of credit agreement of $650 million in support of an internal reinsurance arrangement associated with obligations of a subsidiary. This reinsurance arrangement was terminated as of July 1, 2002, and no letters of credit are currently issued under this agreement.

• CIGNA Corporation has arranged for bank letters of credit in support of CIGNA Global Reinsurance Company, an indirect wholly owned subsidiary, in the amount of $185 million. These letters of credit secure the payment of insureds’claims from run-off reinsurance operations. CIGNA Corporate has agreed to indemnify the banks providing the letters of credit in the event of any draw. As of December 31, 2002 approximately $140 million of letters of credit are issued.

• Various indirect, wholly owned subsidiaries have obtained surety bonds in the normal course of business. If there is a claim on a surety bond and the subsidiary is unable to pay, CIGNA Corporation guarantees payment to the company issuing the surety bond. The aggregate amount of such surety bonds as of December 31, 2002 was approximately $7 million.

• CIGNA Corporation also provides solvency guarantees aggregating approximately $60 million under state and federal regulations in support of its indirect wholly owned medical HMOs in several states.

Through December 31, 2002, no payments have been made on these guarantees and none are pending. CIGNA Corporation provided other guarantees to subsidiaries that, in the aggregate, do not represent a material risk to CIGNA Corporation’s results of operations, liquidity or financial condition.

FS-8

(THIS PAGE INTENTIONALLY LEFT BLANK)

FS-9

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION
(In millions)

Segment	Deferred policy acquisition costs		Future policy benefits and contractholder deposit funds		Unpaid claims and claim expenses
Year Ended December 31, 2001:
Employee Health Care, Life and Disability Benefits	$	45	$	4,480	$	3,466
Employee Retirement Benefits and Investment Services		214		23,208		35
International Life, Health and Employee Benefits		229		632		135
Run-off Reinsurance Operations		-		1,702		759
Other Operations		6		11,200		140
Corporate		-		-		-
Total	$	494	$	41,222	$	4,535
Year Ended December 31, 2001:
Employee Health Care, Life and Disability Benefits	$	44	$	4,550	$	2,948
Employee Retirement Benefits and Investment Services		209		22,264		20
International Life, Health and Employee Benefits		188		508		139
Run-off Reinsurance Operations		-		555		709
Other Operations		7		11,607		134
Corporate		-		-		-
Total	$	448	$	39,484	$	3,950
Year Ended December 31, 2000:
Employee Health Care, Life and Disability Benefits	$	42	$	4,589	$	2,982
Employee Retirement Benefits and Investment Services		191		20,571		21
International Life, Health and Employee Benefits		811		3,007		804
Run-off Reinsurance Operations		1		619		802
Other Operations		7		12,069		153
Corporate		-		-		-
Total	$	1,052	$	40,855	$	4,762

FS-10

Unearned premiums		Premiums and fees (1)		Net investment income (2)		Benefits, losses and settlement expenses (1)		Policy acquisition expenses		Other operating expenses
$	224	$	14,336	$	558	$	10,310	$	67	$	4,577
	3		336		1,649		1,315		57		286
	13		811		51		472		121		223
	3		138		44		1,761		-		70
	-		116		409		456		1		134
	-		-		5		-		-		67
$	243	$	15,737	$	2,716	$	14,314	$	246	$	5,357
$	218	$	13,459	$	599	$	9,488	$	26	$	4,110
	1		322		1,668		1,338		49		294
	14		788		49		481		161		196
	4		148		52		154		-		78
	-		143		450		515		1		158
	-		-		24		-		-		89
$	237	$	14,860	$	2,842	$	11,976	$	237	$	4,925
$	203	$	12,959	$	604	$	9,323	$	16	$	3,637
	2		350		1,617		1,306		43		258
	355		2,042		148		1,451		206		463
	23		365		63		470		2		151
	-		146		459		509		1		139
	-		-		49		-		-		64
$	583	$	15,862	$	2,940	$	13,059	$	268	$	4,712

________________________________

(1) Amounts presented are shown net of the effects of reinsurance. See Note 17 to the Financial Statements included in CIGNA's 2002 Annual Report.

(2) The allocation of net investment income is based upon the investment year method, the identification of certain portfolios with specific segments, or a combination of both.

FS-11

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE IV
REINSURANCE
(In millions)

	Gross amount		Ceded to other companies		Assumed from other companies		Net amount		Percentage of amount assumed to net
Year Ended December 31, 2002:
Life insurance in force	$	334,831	$	59,752	$	181,830	$	456,909		39.8	%
Premiums and fees:
Life insurance and annuities	$	2,205	$	464	$	536	$	2,277		23.5	%
Accident and health insurance		13,483		84		61		13,460		.5
Total	$	15,688	$	548	$	597	$	15,737		3.8	%
Year Ended December 31, 2001:
Life insurance in force	$	437,592	$	69,833	$	172,378	$	540,137		31.9	%
Premiums and fees:
Life insurance and annuities	$	2,331	$	473	$	592	$	2,450		24.2	%
Accident and health insurance		12,497		239		152		12,410		1.2
Total	$	14,828	$	712	$	744	$	14,860		5.0	%
Year Ended December 31, 2000:
Life insurance in force	$	472,926	$	88,561	$	174,538	$	558,903		31.2	%
Premiums and fees:
Life insurance and annuities	$	3,746	$	678	$	900	$	3,968		22.7	%
Accident and health insurance		11,847		226		273		11,894		2.3
Total	$	15,593	$	904	$	1,173	$	15,862		7.4	%

FS-12

CIGNA CORPORATION

SCHEDULE V
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In millions)

Description	Balance at beginning of period		Charged (Credited) to costs and expenses			Charged (Credited) to other accounts -describe(1)			Other deductions -describe(2)			Balance at end of period
2002:
Investment asset valuation reserves:
Mortgage loans	$	15	$	9		$	14		$	(27	)	$	11
Real estate		45		17			24			(65	)		21
Allowance for doubtful accounts:
Premiums, accounts and notes
receivable		43		36			-			(24	)		55
Deferred tax asset valuation
allowance		91		58			-			-			149
Reinsurance recoverables		-		150			-			(1	)		149
2001:
Investment asset valuation reserves:
Mortgage loans	$	37	$	2		$	3		$	(27	)	$	15
Real estate		22		12			27			(16	)		45
Allowance for doubtful accounts:
Premiums, accounts and notes
receivable		54		(2	)		4			(13	)		43
Deferred tax asset valuation
allowance		91		-			-			-			91
Reinsurance recoverables		-		-			-			-			-
2000:
Investment asset valuation reserves:
Mortgage loans	$	11	$	13		$	19		$	(6	)	$	37
Real estate		38		7			10			(33	)		22
Allowance for doubtful accounts:
Premiums, accounts and notes
receivable		65		9			(3	)		(17	)		54
Deferred tax asset valuation
allowance		92		(1	)		-			-			91
Reinsurance recoverables		-		-			-			-			-

________________________________

(1) Change in valuation reserves attributable to policyholder contracts.

(2) Reflects transfer of reserves to other investment asset categories as well as charge-offs upon sales, repayments and other.

FS-13

INDEX TO EXHIBITS

Number		Description	Method of Filing
3.1		Restated Certificate of Incorporation of the registrant as last amended July 22, 1998	Filed as Exhibit 3 to the registrant's Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference.
3.2		By-Laws of the registrant as last amended and restated December 11, 2000	Filed as Exhibit 3.2 to the registrant’s Form 10-K for the year ended December 31, 2000 and incorporated herein by reference.
4	(a)	Amended and Restated Shareholder Rights Agreement dated as of July 22, 1998 between CIGNA Corporation and First Chicago Trust Company of New York	Filed as Item 1 and Exhibit 1 to the registrant's Form 8-A/A Amendment No. 1 dated July 22, 1998 and incorporated herein by reference.
	(b)	Amendment No. 1 dated as of December 14, 1998 to the Amended and Restated Shareholder Rights Agreement	Filed as Item 1 and Exhibit 1 to the registrant's Form 8-A/A Amendment No. 2 dated December 14, 1998 and incorporated herein by reference.
	(c)	Amendment No. 2 dated as of December 31, 2001 to the Amended and Restated Shareholder Rights Agreement	Filed as Exhibit 10.1 to the registrant's Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.

Exhibits 10.1 through 10.24 are filed as exhibits pursuant to Item 14(c) of Form 10-K.

10.1		Deferred Compensation Plan for Directors of CIGNA Corporation, as amended and restated January 1, 1997	Filed as Exhibit 10.1 to the registrant's Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.
10.2		Retirement and Consulting Plan for Directors of CIGNA Corporation, as amended and restated May 29, 1991	Filed as Exhibit 10.2 to the registrant's Form 10-K for the year ended December 31, 1998 and incorporated herein by reference.
10.3		Restated Restricted Stock Plan for Non-Employee Directors of CIGNA Corporation dated as of April 22, 1998	Filed as Exhibit 10 to the registrant's Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference.
10.4		Description of Stock Compensation Plan for Non-Employee Directors of CIGNA Corporation, as amended and restated effective July 1, 2001	Filed As Exhibit 10 to the registrant's Form 10-Q for the quarter ended June 30, 2001 and incorporated herein by reference.
10.5	(a)	CIGNA Corporation Stock Plan, as amended and restated through February 24, 1999	Filed as Exhibit 10.5 to the registrant's Form 10-K for the year ended December 31, 1998 and incorporated herein by reference.

E-1

	(b)	Amendment No. 1 dated as of July 31, 2000 to the CIGNA Corporation Stock Plan	Filed as Exhibit 10.2 to the registrant's Form 10-Q for the quarter ended September 30, 2000 and incorporated herein by reference.
10.6	(a)	CIGNA Executive Severance Benefits Plan effective as of January 1, 1997	Filed as Exhibit 10.7(a) to the registrant's Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.
	(b)	Amendment No. 1 effective February 23, 2000 to the CIGNA Executive Severance Benefits Plan	Filed as Exhibit 10.7(b) to the registrant's Form 10-K for the year ended December 3, 1999 and incorporated herein by reference.
10.7		CIGNA Executive Incentive Plan, as amended and restated January 1, 2002	Filed as Exhibit 10 to the registrant's Form 10-Q for the quarter ended March 31, 2002 and incorporated herein by reference.
10.8	(a)	CIGNA Long-Term Incentive Plan, as amended and restated January 1, 2000	Filed as Appendix A to the registrant's Definitive Proxy Statement on Schedule 14A dated March 22, 2000 and incorporated herein by reference
	(b)	Amendment No. 1 dated as of July 31, 2000 to the CIGNA Long-Term Incentive Plan	Filed as Exhibit 10.2 to the registrant's Form 10-Q for the quarter ended September 30, 2000 and incorporated herein by reference
10.9		CIGNA Deferred Compensation Plan, as amended and restated October 24, 2001	Filed as Exhibit 10 to the registrant’s Form 10-Q for the quarter ended September 30, 2001 and incorporated herein by reference.
10.10	(a)	CIGNA Supplemental Pension Plan, as amended and restated August 1, 1998	Filed as Exhibit 10 to the registrant's Form 10-Q for the quarter ended September 30, 1998 and incorporated herein by reference.
	(b)	Amendment No. 1 dated December 21, 1999 to the CIGNA Supplemental Pension Plan, as amended and restated effective August 1, 1998	Filed as Exhibit 10.11(b) to the registrant's Form 10-K for the year ended December 21,1999 and incorporated herein by reference.
	(c)	Amendment No. 2 dated December 6, 2000 to the CIGNA Supplemental Pension Plan as amended and restated August 1, 1998	Filed as Exhibit 10.11(c) to the registrant's Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.
10.11		Description of CIGNA Corporation Financial Services Program	Filed as Exhibit 10.12 to the registrant's Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.
10.12		Description of the CIGNA Corporation Key Management Annual Incentive Bonus Plan	Filed as Exhibit 10.13 to the registrant's Form 10-K for the year ended December 31, 1998 and incorporated herein by reference.

E-2

10.13	Special Retention Agreement dated January 25, 1995 with Mr. Stewart	Filed as Exhibit 10.14 to the registrant’s Form 10-K for the year ended December 31, 2000 and incorporated herein by reference.
10.14	Special Retention Agreement dated March 27, 1996 with Mr. Levinson	Filed as Exhibit 10.15 to the registrant's Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.
10.15	Form of Non-Compete Agreement dated December 8, 1997 with Messrs. Hanway and Levinson	Filed herewith.
10.16	Description of Mandatory Deferral of Non-Deductible Executive Compensation Arrangement	Filed as Exhibit 10.17 to the registrant's Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.
10.17	Special Incentive Agreement with Mr. Stewart dated March 17, 1998	Filed herewith.
10.18	Special Incentive Agreement with Mr. Levinson dated March 17, 1998	Filed herewith.
10.19	Special Incentive Agreement with Mr. Hanway dated March 17, 1998	Filed herewith.
10.20	Non-Compete Agreement and Description of Supplemental Pension Arrangement with Mr. Pastore dated November 14, 1997	Filed as Exhibit 10.21 to the registrant's Form 10-K for the period ended December 31, 2001 and incorporated herein by reference.
10.21	Agreement dated July 25, 2002 with Mr. Pastore	Filed as Exhibit 10 to the registrant's Form 10-Q for the quarter ended September 30, 2002 and incorporated herein by reference.
10.22	Arrangements relating to Mr. Welch’s compensation and pension	Filed herewith.
10.23	Agreement and Release dated December 16, 2002 with Mr. Stewart	Filed herewith.
10.24	Arrangements relating to Mr. Kim’s compensation	Filed herewith.
12	Computation of Ratios of Earnings to Fixed Charges	Filed herewith.
13	Portions of registrant's 2002 Annual Report to Shareholders (Entire Annual Report bound in printed versions of Form 10-K)	Filed herewith.
21	Subsidiaries of the Registrant	Filed herewith.

E-3

23	Consent of Independent Accountants	Filed herewith.
24.1	Powers of Attorney	Filed herewith.
24.2	Certified Resolutions	Filed herewith.
99.1	Certification of Chief Executive Officer of CIGNA Corporation pursuant to 18 U.S.C. Section 1350	Filed herewith.
99.2	Certification of Chief Financial Officer of CIGNA Corporation pursuant to 18 U.S.C. Section 1350	Filed herewith.

        The registrant will furnish to the Commission upon request a copy of any of the registrant's agreements with respect to its long-term debt.

        Shareholders may obtain copies of exhibits by writing to CIGNA Corporation, Shareholder Services Department, Two Liberty Place, 1601 Chestnut Street, P.O. Box 7716, Philadelphia, PA 19192.

E-4

EX-10

Exhibit 10.15

NON-COMPETE AGREEMENT

        This Non-Compete Agreement (“Agreement”) is dated as of December 8, 1997, and is between_____________________________, who resides at ____________________________ ____________________________ (“Executive”) and CIGNA Corporation, 1650 Market Street, Philadelphia, Pennsylvania, 19192, a Delaware corporation (“CIGNA”).

        WHEREAS, on December 8, 1997 CIGNA granted to Executive an option to purchase _________ shares of CIGNA Common Stock (the “Option”), and the People Resources Committee of CIGNA’s Board of Directors provided that the Option grant was conditioned on Executive’s entering into a non-compete agreement with CIGNA;

        NOW, THEREFORE, Executive and CIGNA, intending to be legally bound and in consideration of the Option grant and the promises in this Agreement, mutually agree as follows:

1. In addition to the terms defined above, the following definitions apply to the terms used in this Agreement:

a. "Company" means CIGNA Corporation and its subsidiaries and affiliates.

b.  “Competitor” means any person or business entity that offers for sale to third parties, in markets that at the relevant time the Company serves or is actively planning to serve, any products or services of a type that are then provided to Company customers as part of the Company’s Protected Business.

c.  “Protected Business” means those business activities that (1) have been conducted by the Company to the extent the Executive had any significant responsibilities for such business at any time during the twenty-four (24) month period ending on the date Executive’s employment with the Company terminates or (2) have actively been planned by the Company to the extent Executive has been significantly involved in such plans at any time during the twelve (12) month period ending on the date Executive’s employment with the Company terminates.

d. "Restricted Area" means any geographic area where the Company is conducting any Protected Business.

e. "Restriction Period" means the period beginning on the date Executive's employment with the Company terminates and ending on the first anniversary of that date.

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2. Executive agrees that, during the Restriction Period in the Restricted Area, he will not without the advance written consent of a duly authorized officer of the Company:

a. Become an owner (other than as a shareholder with less than a 2% interest), employee or independent contractor of any Competitor;

b. Solicit or attempt to solicit, directly or indirectly, on behalf of any Competitor, any person, entity or business that at the time of the solicitation is (or as of the date of Executive’s termination of employment was) a customer of the Company to purchase any products or services of a type then available from the Company; or

c. Directly or indirectly, solicit or hire, solicit the employment or engagement for hire, or otherwise attempt to employ or engage for hire, as an employee or independent contractor any person who, within the one-year period immediately before the date of Executive’s termination of employment, has been an officer or employee of the Company, unless the employment of such officer or employee has been unilaterally terminated by the Company.

3. Executive acknowledges that the Company will have no adequate remedy at law if Executive violates the terms of paragraph 2 above. In such event, notwithstanding paragraph 6 below, the Company shall have the right, in addition to any other rights it may have, to obtain in any court of competent jurisdiction injunctive relief to restrain any breach or threatened breach of specific performance of paragraph 2 of this Agreement. If, in any such proceeding, the court finds that the scope of protections afforded the Company is too broad to be enforceable under relevant law, then it is the intent of the parties that the court reduce the scope of the protections, but only to the extent necessary to make the protections enforceable, and then to enforce the protections as reduced in scope.

4. This Agreement is not a contract of employment for any specified term, and nothing herein is intended to, nor shall be construed as, changing the nature of Executive’s employment from an at-will relationship. This Agreement is limited to the terms and conditions set forth herein and does not otherwise address Executive’s compensation or benefits, the duties and responsibilities of his position, or any of the Company’s other rights as employer.

5. The Agreement is made and entered into in the Commonwealth of Pennsylvania, and at all times and for all purposes shall be interpreted, enforced and governed under its laws, without regard to principles of conflict of laws.

6. It is agreed that any controversy or claim arising out of or relating to this Agreement, other than the Company’s attempt to obtain injunctive relief under paragraph 3 above, shall be settled exclusively by arbitration in Philadelphia, Pennsylvania, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof.

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7. CIGNA’s rights and obligations under this Agreement will inure to the benefit of and be binding upon CIGNA’s successors and assigns. Executive’s rights and obligations under this Agreement shall not be assignable without CIGNA’s express, written consent.

8. This Agreement contains the entire agreement between Executive and CIGNA with respect to the matters addressed herein and fully replaces and supersedes any and all other prior agreements or understandings between them related to such matters. Any amendment to this Agreement must be in writing and signed by both CIGNA and Executive.

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EX-10

Exhibit 10.17

SPECIAL INCENTIVE AGREEMENT

        This Special Incentive Agreement (“Agreement”) is dated as of March 17, 1998 and is between James G. Stewart, who resides at ______________, _____________ (“Executive”) and CIGNA Corporation, 1650 Market Street, Philadelphia, Pennsylvania, 19192, a Delaware corporation (“CIGNA”).

        Executive and CIGNA, intending to be legally bound and in consideration of the promises in this Agreement, mutually agree as follows:

1. Effective as of the date of this Agreement:

a.  1,750 restricted shares of CIGNA Common Stock held by the Executive, for which restrictions described in the CIGNA Corporation Stock Plan (“Plan”) are scheduled to lapse on February 23, 1999 will be surrendered to CIGNA, and Executive, on his own behalf and on behalf of his heirs, waives any rights regarding such shares; and

b. CIGNA grants Executive 1,750 incentive compensation units ("Units") as described in paragraph 2.

2. Each Unit is a right to receive a payment of the Unit value on the Payment Date, subject to the conditions in this Agreement. The “Payment Date” shall be as described in paragraph 4.

3. Each Unit shall have a value equal to the total of:

a. The Fair Market Value (as defined in the Plan) on the Payment Date of one (1) share of CIGNA Common Stock (adjusted as needed in accordance with the antidilution provisions in Article 5 of the Plan);

b. The total cash value of any dividends that would have been paid on one (1) share of CIGNA Common Stock (as adjusted in accordance with paragraph 2.a.) from the Date of this Agreement until the Payment Date; and

c.  The total cash value of any interest that would have been paid on any dividends under paragraph 2.b. as if the dividends had actually been paid to the Executive and invested with an annual rate of return for any year equal to either (i) one hundred twenty percent (120%) of the applicable federal long-term rate for the month of January of the calendar year for which the interest will be credited, with compounding on a monthly basis or (ii) the return provided by hypothetical investment fund(s) under the Deferred Compensation Plan of CIGNA Corporation and Participating Subsidiaries (the “Deferred Plan”), to the extent Executive has elected one or more of the available hypothetical investment funds, other than the fixed income fund, under the Deferred Plan.

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4. The Unit value under this Agreement shall be paid only as follows:

a. The share component (paragraph 2.a.) shall be paid entirely in shares of CIGNA Common Stock. This Agreement is a Qualifying Incentive Plan, and any shares shall be paid out of the Plan.

b. The dividend-equivalent component (paragraph 2.b.) and the interest-equivalent component (paragraph 2.c.) shall be paid in cash.

c.  The Payment Date for the Units shall be no earlier than the January following the date of Executive’s termination of employment with CIGNA and its affiliates (“Termination of Employment”) and shall otherwise be determined in accordance with Executive’s Deferred Plan payment election as in effect on the date of Executive’s Termination of Employment. However, any change made by the Executive in any payment election under the Deferred Plan after the date of this Agreement will not apply to the share component of the Units unless such change has been approved by the People Resources Committee of CIGNA’s Board of Directors and otherwise meets the requirements of the Deferred Plan. If no payment election is in effect on the date of Executive’s Termination of Employment, the Payment Date for all Units shall be the January following the year of Executive’s Termination of Employment.

d.  If Executive dies before his Termination of Employment, however, any Unit value otherwise payable to the Executive under this Agreement will be paid within ninety (90) days of his death to his surviving spouse or, if she does not survive him, to his estate.

5. The Executive shall forfeit all of the Units, and shall have no right to receive any payments under this Agreement, if his Termination of Employment occurs before February 23, 1999. Nevertheless, if Executive’s Termination of Employment before that date is due to the Executive’s death, Disability or Retirement or is a Termination Upon a Change of Control, the forfeiture described above shall not apply and the Executive’s right to a payment of the Unit value shall immediately vest. (“Disability,” “Retirement” and “Termination Upon a Change of Control” shall have the meanings set forth in Section 2.1 of the Plan.)

6. This Agreement is not a contract of employment for any specified term, and nothing herein is intended to change, nor shall be construed as changing, the nature of Executive’s employment from an at-will relationship. This Agreement is limited to the terms and conditions set forth herein and does not otherwise address Executive’s compensation or benefits, the duties and responsibilities of his position, or any of the Company’s other rights as employer.

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7. The Agreement is made and entered into in the Commonwealth of Pennsylvania, and at all times and for all purposes shall be interpreted, enforced and governed under its laws without regard to principles of conflict of laws.

8. It is agreed that any controversy or claim arising out of or relating to this Agreement shall be settled exclusively by arbitration in Philadelphia, Pennsylvania, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof.

9. CIGNA’s rights and obligations under this Agreement will inure to the benefit of and be binding upon CIGNA’s successors and assigns. Executive’s rights under this Agreement, including the right to receive Common Stock or any other payment, shall not be assignable or transferable by the Executive except by will or by the laws of descent and distribution. Any other attempted assignment or alienation shall be void and of no force or effect.

10. The Company’s obligations under this Agreement shall be unfunded and unsecured and shall be paid when due out of the general assets of the Company. However, the Company’s obligations may be funded through the CIGNA Corporation Benefits Protection Trust or other “rabbi trust”  arrangement which is a grantor trust the assets of which are not subject to the claims of creditors of the Company, except in the case of bankruptcy or insolvency of the Company.

11. This Agreement contains the entire agreement between Executive and CIGNA with respect to the matters addressed herein and fully replaces and supersedes any and all prior agreements or understandings between them related to such matters. Any amendment to this Agreement must be in writing and signed by both CIGNA and Executive.

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EX-10

Exhibit 10.18

SPECIAL INCENTIVE AGREEMENT

        This Special Incentive Agreement (“Agreement”) is dated as of March 17, 1998 and is between Donald M. Levinson, who resides at ______________, _____________ (“Executive”) and CIGNA Corporation, 1650 Market Street, Philadelphia, Pennsylvania, 19192, a Delaware corporation (“CIGNA”).

        Executive and CIGNA, intending to be legally bound and in consideration of the promises in this Agreement, mutually agree as follows:

1. Effective as of the date of this Agreement:

a.  1,000 restricted shares of CIGNA Common Stock held by the Executive, for which restrictions described in the CIGNA Corporation Stock Plan (“Plan”) are scheduled to lapse on February 23, 1999 will be surrendered to CIGNA, and Executive, on his own behalf and on behalf of his heirs, waives any rights regarding such shares; and

b. CIGNA grants Executive 1,000 incentive compensation units ("Units") as described in paragraph 2.

2. Each Unit is a right to receive a payment of the Unit value on the Payment Date, subject to the conditions in this Agreement. The “Payment Date” shall be as described in paragraph 4.

3. Each Unit shall have a value equal to the total of:

a. The Fair Market Value (as defined in the Plan) on the Payment Date of one (1) share of CIGNA Common Stock (adjusted as needed in accordance with the antidilution provisions in Article 5 of the Plan);

b. The total cash value of any dividends that would have been paid on one (1) share of CIGNA Common Stock (as adjusted in accordance with paragraph 2.a.) from the Date of this Agreement until the Payment Date; and

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c.  The total cash value of any interest that would have been paid on any dividends under paragraph 2.b. as if the dividends had actually been paid to the Executive and invested with an annual rate of return for any year equal to either (i) one hundred twenty percent (120%) of the applicable federal long-term rate for the month of January of the calendar year for which the interest will be credited, with compounding on a monthly basis or (ii) the return provided by hypothetical investment fund(s) under the Deferred Compensation Plan of CIGNA Corporation and Participating Subsidiaries (the “Deferred Plan”), to the extent Executive has elected one or more of the available hypothetical investment funds, other than the fixed income fund, under the Deferred Plan.

4. The Unit value under this Agreement shall be paid only as follows:

a. The share component (paragraph 2.a.) shall be paid entirely in shares of CIGNA Common Stock. This Agreement is a Qualifying Incentive Plan, and any shares shall be paid out of the Plan.

b. The dividend-equivalent component (paragraph 2.b.) and the interest-equivalent component (paragraph 2.c.) shall be paid in cash.

c.  The Payment Date for the Units shall be no earlier than the January following the date of Executive’s termination of employment with CIGNA and its affiliates (“Termination of Employment”) and shall otherwise be determined in accordance with Executive’s Deferred Plan payment election as in effect on the date of Executive’s Termination of Employment. However, any change made by the Executive in any payment election under the Deferred Plan after the date of this Agreement will not apply to the share component of the Units unless such change has been approved by the People Resources Committee of CIGNA’s Board of Directors and otherwise meets the requirements of the Deferred Plan. If no payment election is in effect on the date of Executive’s Termination of Employment, the Payment Date for all Units shall be the January following the year of Executive’s Termination of Employment.

d.  If Executive dies before his Termination of Employment, however, any Unit value otherwise payable to the Executive under this Agreement will be paid within ninety (90) days of his death to his surviving spouse or, if she does not survive him, to his estate.

5. The Executive shall forfeit all of the Units, and shall have no right to receive any payments under this Agreement, if his Termination of Employment occurs before February 23, 1999. Nevertheless, if Executive’s Termination of Employment before that date is due to the Executive’s death, Disability or Retirement or is a Termination Upon a Change of Control, the forfeiture described above shall not apply and the Executive’s right to a payment of the Unit value shall immediately vest. (“Disability,”  “Retirement” and “Termination Upon a Change of Control”  shall have the meanings set forth in Section 2.1 of the Plan.)

6. This Agreement is not a contract of employment for any specified term, and nothing herein is intended to change, nor shall be construed as changing, the nature of Executive’s employment from an at-will relationship. This Agreement is limited to the terms and conditions set forth herein and does not otherwise address Executive’s compensation or benefits, the duties and responsibilities of his position, or any of the Company’s other rights as employer.

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7. The Agreement is made and entered into in the Commonwealth of Pennsylvania, and at all times and for all purposes shall be interpreted, enforced and governed under its laws without regard to principles of conflict of laws.

8. It is agreed that any controversy or claim arising out of or relating to this Agreement shall be settled exclusively by arbitration in Philadelphia, Pennsylvania, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof.

9. CIGNA’s rights and obligations under this Agreement will inure to the benefit of and be binding upon CIGNA’s successors and assigns. Executive’s rights under this Agreement, including the right to receive Common Stock or any other payment, shall not be assignable or transferable by the Executive except by will or by the laws of descent and distribution. Any other attempted assignment or alienation shall be void and of no force or effect.

10. The Company’s obligations under this Agreement shall be unfunded and unsecured and shall be paid when due out of the general assets of the Company. However, the Company’s obligations may be funded through the CIGNA Corporation Benefits Protection Trust or other “rabbi trust”  arrangement which is a grantor trust the assets of which are not subject to the claims of creditors of the Company, except in the case of bankruptcy or insolvency of the Company.

11. This Agreement contains the entire agreement between Executive and CIGNA with respect to the matters addressed herein and fully replaces and supersedes any and all prior agreements or understandings between them related to such matters. Any amendment to this Agreement must be in writing and signed by both CIGNA and Executive.

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EX-10

Exhibit 10.19

SPECIAL INCENTIVE AGREEMENT

        This Special Incentive Agreement (“Agreement”) is dated as of March 17, 1998 and is between H. Edward Hanway, who resides at ______________, _____________ (“Executive”) and CIGNA Corporation, 1650 Market Street, Philadelphia, Pennsylvania, 19192, a Delaware corporation (“CIGNA”).

        Executive and CIGNA, intending to be legally bound and in consideration of the promises in this Agreement, mutually agree as follows:

1.  Effective as of the date of this Agreement:

a.  500 restricted shares of CIGNA Common Stock held by the Executive, for which restrictions described in the CIGNA Corporation Stock Plan (“Plan”) are scheduled to lapse on February 23, 1999 will be surrendered to CIGNA, and Executive, on his own behalf and on behalf of his heirs, waives any rights regarding such shares; and

b. CIGNA grants Executive 500 incentive compensation units ("Units") as described in paragraph 2.

2.  Each Unit is a right to receive a payment of the Unit value on the Payment Date, subject to the conditions in this Agreement. The “Payment Date” shall be as described in paragraph 4.

3.  Each Unit shall have a value equal to the total of:

a. The Fair Market Value (as defined in the Plan) on the Payment Date of one (1) share of CIGNA Common Stock (adjusted as needed in accordance with the antidilution provisions in Article 5 of the Plan);

b. The total cash value of any dividends that would have been paid on one (1) share of CIGNA Common Stock (as adjusted in accordance with paragraph 2.a.) from the Date of this Agreement until the Payment Date; and

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c.  The total cash value of any interest that would have been paid on any dividends under paragraph 2.b. as if the dividends had actually been paid to the Executive and invested with an annual rate of return for any year equal to either (i) one hundred twenty percent (120%) of the applicable federal long-term rate for the month of January of the calendar year for which the interest will be credited, with compounding on a monthly basis or (ii) the return provided by hypothetical investment fund(s) under the Deferred Compensation Plan of CIGNA Corporation and Participating Subsidiaries (the “Deferred Plan”), to the extent Executive has elected one or more of the available hypothetical investment funds, other than the fixed income fund, under the Deferred Plan.

4.  The Unit value under this Agreement shall be paid only as follows:

a. The share component (paragraph 2.a.) shall be paid entirely in shares of CIGNA Common Stock. This Agreement is a Qualifying Incentive Plan, and any shares shall be paid out of the Plan.

b. The dividend-equivalent component (paragraph 2.b.) and the interest-equivalent component (paragraph 2.c.) shall be paid in cash.

c.  The Payment Date for the Units shall be no earlier than the January following the date of Executive’s termination of employment with CIGNA and its affiliates (“Termination of Employment”) and shall otherwise be determined in accordance with Executive’s Deferred Plan payment election as in effect on the date of Executive’s Termination of Employment. However, any change made by the Executive in any payment election under the Deferred Plan after the date of this Agreement will not apply to the share component of the Units unless such change has been approved by the People Resources Committee of CIGNA’s Board of Directors and otherwise meets the requirements of the Deferred Plan. If no payment election is in effect on the date of Executive’s Termination of Employment, the Payment Date for all Units shall be the January following the year of Executive’s Termination of Employment.

d.  If Executive dies before his Termination of Employment, however, any Unit value otherwise payable to the Executive under this Agreement will be paid within ninety (90) days of his death to his surviving spouse or, if she does not survive him, to his estate.

5. The Executive shall forfeit all of the Units, and shall have no right to receive any payments under this Agreement, if his Termination of Employment occurs before February 23, 1999. Nevertheless, if Executive’s Termination of Employment before that date is due to the Executive’s death, Disability or Retirement or is a Termination Upon a Change of Control, the forfeiture described above shall not apply and the Executive’s right to a payment of the Unit value shall immediately vest. (“Disability,” “Retirement” and “Termination Upon a Change of Control” shall have the meanings set forth in Section 2.1 of the Plan.)

6. This Agreement is not a contract of employment for any specified term, and nothing herein is intended to change, nor shall be construed as changing, the nature of Executive’s employment from an at-will relationship. This Agreement is limited to the terms and conditions set forth herein and does not otherwise address Executive’s compensation or benefits, the duties and responsibilities of his position, or any of the Company’s other rights as employer.

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7. The Agreement is made and entered into in the Commonwealth of Pennsylvania, and at all times and for all purposes shall be interpreted, enforced and governed under its laws without regard to principles of conflict of laws.

8. It is agreed that any controversy or claim arising out of or relating to this Agreement shall be settled exclusively by arbitration in Philadelphia, Pennsylvania, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof.

9. CIGNA’s rights and obligations under this Agreement will inure to the benefit of and be binding upon CIGNA’s successors and assigns. Executive’s rights under this Agreement, including the right to receive Common Stock or any other payment, shall not be assignable or transferable by the Executive except by will or by the laws of descent and distribution. Any other attempted assignment or alienation shall be void and of no force or effect.

10. The Company’s obligations under this Agreement shall be unfunded and unsecured and shall be paid when due out of the general assets of the Company. However, the Company’s obligations may be funded through the CIGNA Corporation Benefits Protection Trust or other “rabbi trust”  arrangement which is a grantor trust the assets of which are not subject to the claims of creditors of the Company, except in the case of bankruptcy or insolvency of the Company.

11. This Agreement contains the entire agreement between Executive and CIGNA with respect to the matters addressed herein and fully replaces and supersedes any and all prior agreements or understandings between them related to such matters. Any amendment to this Agreement must be in writing and signed by both CIGNA and Executive.

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EX-10

Exhibit 10.22

In connection with his hire as President, CIGNA HealthCare in 2002, Pat Welch received from CIGNA:

• a guarantee of his bonus for 2002 at no less than $800,000;

•  transition awards under CIGNA’s Long-term Incentive Plan of 10,000 units to be paid in May, 2003 guaranteed at no less than $150 per unit, or $1,500,000, 12,335 units to be paid in May, 2004 guaranteed at no less than $150 per unit, or $1,850,000, and 15,000 units to be paid in May, 2005 under the formula provided by the Plan, which provides a target value of $75 per unit, or $1,125,000; and

• A stock option award with a Black-Scholes value of $525,000.

In addition, if Mr. Welch retires from CIGNA any time after reaching age 60, or if CIGNA terminates Mr. Welch other than for Cause before he reaches age 60, CIGNA will pay him a non-qualified, unfunded pension benefit determined by using the benefit formula under the pension plan of his former employer (National Life Insurance Company) and his actual salary and bonuses at both National Life and CIGNA, reduced by his actual vested pension benefits, if any, under the pension plans of National Life and CIGNA. If Mr. Welch voluntarily leaves CIGNA before age 60, CIGNA will pay Mr. Welch a non-qualified, unfunded pension benefit equal to the unvested benefit he forfeits under the CIGNA Pension Plan.

EX-10

Exhibit 10.23

AGREEMENT AND RELEASE

        This Agreement and Release (Agreement) is dated December 16, 2002 (Today), and is between James G. Stewart, (you), and CIGNA Corporation, a Delaware corporation (the Company).

        You and the Company intend to be legally bound by the Agreement, and are entering into it in reliance on the promises made to each other in the Agreement. Under the Agreement, your employment will end, and you and the Company agree to settle all issues concerning your employment and termination of employment. The Company will pay you certain benefits described in this agreement. In turn, you are releasing legal claims against the Company.

        1. Your Retirement Date. Your employment with the Company will end on December 31, 2002 (the Retirement Date).

        2. Your Promises to the Company.

a. Terms used in paragraph 2 are defined as follows:

(1) "CIGNA" means the Company and any subsidiaries or affiliates of the Company.

(2) “Confidential Information” means any knowledge, information or materials belonging to the Company or the Division about their products, services, know-how, customers, business plans, or financial, marketing, pricing, compensation and other proprietary matters, whether or not subject to trademark, copyright, trade secret or other protection, that has been made known to you as a result of your Company employment.

(3) "Division" means the CIGNA Finance Division.

b. Prior to your Retirement Date, you will return to CIGNA any CIGNA property that you now have (for example: identification card, access card, office keys, computer, company manuals, office equipment, records and files); provided, however, you will not be required to return rolodexes, personal diaries (including your Blackberry), or correspondence and other items of a personal nature. If those personal items are responsive to instructions you have received to retain documents in connection with legal proceedings and an SEC inquiry, you must continue to retain them after your retirement.

c. You agree that, other than in the good faith performance of your services to the Company before the Retirement Date, you will not disclose any Confidential Information to anyone other than CIGNA employees or use any Confidential Information for your benefit or the benefit of any other person, firm, operation or entity unrelated to CIGNA except to the extent disclosure is or may be required by a statute, by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order you to divulge, disclose or make accessible such information. After an item of Confidential Information has become public knowledge or known generally in the industry, you shall have no further obligation under this paragraph 2.c regarding that publicly known information so long as you were in no manner responsible, directly or indirectly, for permitting the information to become public knowledge without the Company’s consent.

d. You will not, within any part of the United States or any other country where the Division currently conducts business:

(1) until December 31, 2004, engage directly or indirectly, in any capacity (including, but not limited to owner, sole proprietor, partner, shareholder (unless your holding is for investment purposes only and is limited to less than 1% of the total combined voting power of all shares), employee, agent, consultant, officer or director) in any business that competes with the Company without prior written consent of the Executive Vice President–Human Resources and Services of CIGNA Corporation or the Chief Executive Officer of CIGNA Corporation, which consent shall not be unreasonably withheld and

(2) until December 31, 2004, you will not solicit in any manner:

(a) any of CIGNA’s employees, either to terminate employment with CIGNA or to become employed, as an employee or independent contractor, by you or by any business that you may become employed by, or affiliated in any way with, after leaving CIGNA; or

(b) any of CIGNA’s customers to terminate their business arrangements with CIGNA, or to enter into any business arrangements with you or any business which you may become employed by, or affiliated in any way with, after leaving CIGNA, if such business arrangements would compete in any way with any business which CIGNA has conducted, or been planning to conduct, during the 12-month period ending Today (provided that it shall not be a violation of this paragraph 2.d(2) if any business that you become employed by or associated with responds to a solicitation for a proposal from a CIGNA customer, so long as you are not significantly involved in the development or delivery of the proposal).

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e. You agree that the duration, area and scope of activities restricted under paragraphs 2.c and 2.d are reasonable and necessary to protect Company’s legitimate business interests and that, if any court or arbitrator determines that paragraphs 2.c or 2.d or any part of them is unenforceable because of the duration, area or scope of activities restricted, then the court or arbitrator shall have the power to reduce the duration, area or scope to the maximum allowed by applicable law and, in its reduced form, the provision shall then be enforced and you will abide by the provision as altered.

f.  You agree not to sell more than 25% of your shares of CIGNA common stock during any stock trading window period as long as you are subject to the window period and no more than 15,000 shares of CIGNA common stock on any single day after you are no longer required to trade during window periods. You will be subject to the stock trading window until December 31, 2003. You agree that you will continue to clear all trades with the Corporate Secretary until December 31, 2004.

g.  You shall be entitled to indemnification by the Company to the fullest extent permitted or authorized by its by-laws on the same basis as the indemnification provided to other former directors and officers against all costs, charges and expenses incurred or sustained by you (including but not limited to any judgment entered by a court of law), in connection with any action, suit or proceeding to which you may be made a party by reason of your having been an officer or employee of the Company or any subsidiary of the Company. The Company shall advance to you all reasonable costs and expenses incurred by you in connection with any action, suit or proceeding as provided under relevant by-laws, after receipt by the Company of a written request for such advance. Such request shall include an undertaking by you to repay the amount of such advance if it shall ultimately be determined that you are not entitled to be indemnified against such costs and expenses and such taxes.

h. You agree to make yourself available to the Company in connection with any legal proceedings as to which you may have knowledge of potentially relevant facts.

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        3. Your Retirement Arrangements.

a. From Today until your Retirement Date, the Company will pay you your regular salary and you may continue to participate in the Company’s employee benefits programs. During this period, you agree to remain available for internal consulting and advice to the CEO and other division heads.

b. If you die before the Company pays you all amounts due under paragraph 3 of the Agreement, the remaining amounts will be paid to your surviving spouse in a lump sum within 90 calendar days after the date of your death. If you have no surviving spouse, the payment will be made to your estate.

c. In March 2003, you will be eligible to receive a bonus payment under the standard process for service performed in 2002. In January 2004 you will receive a consulting fee for remaining available to provide consulting to CIGNA’s CEO and other division heads for up to one year following your Retirement date. This consulting fee will be equal to 50% of your annual bonus target (less applicable withholding).

d. In May 2003, May 2004 and May 2005, you will receive Strategic Performance Unit payouts for Strategic Performance Units previously awarded to you. The payments will be in cash, in amounts that are in accordance with the formula under the Strategic Performance Unit provisions of the CIGNA Long-Term Incentive Plan and that are based on the same Unit values that apply to other senior executives.

e.  Any benefits you may have earned under the CIGNA Pension, Supplemental Pension, Deferred Compensation, Medical, Life Insurance and 401(k) Plans will be payable to you under the provisions of those plans except as modified under contractual arrangements which have been previously disclosed in public filings.

f.  Any options on Company stock that you hold will continue to vest under the terms of your applicable grant letters and will expire on the original expiration dates specified in your applicable grant letters.

g. The Company will provide you with:

(1) Executive Financial Services through year-end 2007;

(2) Reimbursement for reasonable tax preparation fees incurred for income tax returns for income through year-end 2007;

h. With respect to any shares of restricted CIGNA Corporation stock that you hold on your Retirement Date (RSGs):

4

(1) The Company will, within 30 days after your Retirement Date, make a lump sum cash payment to you equal to (a) seventy-two percent of the number of RSGs that you forfeit on your Retirement Date multiplied by (b) the average closing price of a share of CIGNA Corporation stock on the 10 trading days ending on your Retirement Date.

(2) The other twenty-eight percent of the RSGs will be forfeited without reimbursement.

i. You will receive no other money from Company except as provided in this Agreement.

        4. Your Release of Claims.

a. You agree that you will not file (or ask or let anyone file for you) any charge, complaint, claim or lawsuit of any kind in connection with any claim released by this Agreement against any Released Person. However, the preceding sentence does not apply to any claim you might file alleging that your waiver of claims under the Age Discrimination in Employment Act of 1967 (ADEA) was not knowing and voluntary.

b. You acknowledge full and complete satisfaction of, and release and discharge all Released Persons from, any Claims.

c. You are giving this release for yourself as well as for your executors, administrators, heirs and assigns.

d. "Released Persons" are the Company, its successors, parents, subsidiaries and affiliates, and all of their directors, officers, agents and employees.

e. “Claims” are any and all claims, demands and causes of action of whatever kind, including any claims for attorneys fees, that you now have, or at any time had, against any Released Persons, but only to the extent they arise out of or relate in any way to your employment or termination of employment with the Company and its affiliates. “Claims” includes things you may not even know about or suspect as well as any claims you may have under ADEA.

f. "Claims" does not include (and you are not releasing):

(1) any claims against the Company for promises it is making to you in this Agreement,

(2) any claims for benefits under any retirement, savings, or other employee benefit programs,

5

(3) any claims covered by workers compensation laws,

(4) any rights you have to indemnification under the Company's by-laws, directors and officers liability insurance or this agreement and

(5) any claims that you did not knowingly and voluntarily waive your rights under ADEA.

        5. No Mitigation, No Offset.  You shall have no duty to seek other employment and there shall be no offset against amounts due on account of any remuneration you may receive attributable to any subsequent employment or self-employment.

        6. Anti-disparagement.  The Company and you each agree that we shall not (except as required by law) directly or indirectly make any statement or encourage others to make any statement or release any information that is designed to embarrass or criticize the other (or any of our respective affiliates or associates), provided that it shall not be a violation of this paragraph 6 for either the Company or you to make truthful statements when required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order us to divulge, disclose or make accessible such information.

        7. No Admission of Wrongdoing. Just because the Company is entering into this Agreement and paying you money, the Company is not admitting that it (or any Released Person) has done anything wrong or violated any law, rule, order, policy, procedure, or contract, express or implied, or otherwise incurred any liability.

        8. Applicable Law. This Agreement is being made in Pennsylvania. It will be interpreted, enforced and governed under the laws of Pennsylvania, but your eligibility for, or the amount of any, employee benefits shall be subject to the terms of the benefit plans and the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).

        9. Arbitration. Without in any way affecting the release in paragraph 4, any and all disagreements, disputes or claims listed below will be resolved exclusively by arbitration in the Philadelphia, Pennsylvania area. Arbitration will be conducted in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association, as modified by Company. Copies of the Arbitration Policy and Rules and Procedures can be obtained from your Human Resources representative. A legal judgment based upon the Arbitrator’s award may be entered in any court having jurisdiction over the matter. You and the Company agree to arbitrate anything:

6

a. related in any way to the validity of this Agreement or how it is interpreted or implemented (including the validity of your ADEA waiver); or

b.  that involves your employment with Company or the termination of that employment, including any disputes arising under local, state or federal statues or common law (if for any reason your release and waiver under paragraph 4 is found to be unenforceable or inapplicable).

        10. Final and Entire Agreement. This Agreement is intended to be the complete, entire and final agreement between you and the Company. It fully replaces all earlier agreements or understandings; however, it does not replace the terms of any employee benefit plan or terms included in any stock option grant. Neither you nor the Company has relied upon any other statement, agreement or contract, written or oral, in deciding to enter into this Agreement. Any amendment to this Agreement must be in writing and signed by both you and the Company.

        11. Your Understanding.  By signing this Agreement, you admit and agree that:

a. You have read this Agreement.

b. You understand it is legally binding, and you were advised to review it with a lawyer of your choice.

c.  You have had (or had the opportunity to take) 21 calendar days to discuss it with a lawyer of your choice before signing it and, if you sign it before the end of that period, you do so of his own free will and with the full knowledge that you could have taken the full period.

d. You realize and understand that the release covers all claims, demands, and causes of action against the Company and any Released Persons, including those under ADEA, whether or not you know or suspect them to exist at the present time (but the release does not apply to claims described in paragraph 4.f).

7

e. You understand the terms of this Agreement and that it is not part of an exit incentive or other employment termination program being offered to a group or class of employees.

f. You are signing this Agreement voluntarily and with the full understanding of its consequences, and you have not been forced or coerced in any way.

        12. Revoking the Agreement.You have seven calendar days from the date you sign this Agreement to revoke and cancel it. To do that, a clear, written cancellation letter, signed by you, must be received by Kenneth Bottoms, CIGNA Corporation, 1650 Market Street OL54H, Philadelphia, PA, 19192 before 5:00 p.m. Eastern Time on the seventh calendar day following the date you sign this Agreement. The Agreement will have no force and effect until the end of that seventh day.

        13. If Legal Action Is Started.You understand and agree that Company’s main reason for entering into this Agreement is to avoid lawsuits and other litigation. Therefore, if any legal action covered by paragraph 4 or 9 (other than arbitration of a dispute described in paragraph 9.a or b or claims related to whether your release of ADEA claims was knowing and voluntary) is started by you (or by someone else on your behalf) against any Released Person, you agree to pay back to the Company within 30 days of the start of that legal action all the money you receive under paragraph 3 (except sub-paragraph 3.e) above as well as any other thing of value received under this Agreement. You also agree to pay the Company any costs and attorneys’ fees it incurs in that action in such action. (If you claim that your release of ADEA claims was not knowing and voluntary, the Company reserves its right to recover from you its attorneys’fees and/or costs in defending that claim, at the conclusion of that action.)

If in any legal action or arbitration commenced by you (or someone else on your behalf and with your consent) the release in paragraph 4 is found to be unenforceable for any reason, then this Agreement shall be null and void from Today on, and any money paid to you by the Company after Today under paragraph 3 (except sub-paragraph 3.e and not previously returned to the Company, will be treated as an overpayment. You will have to repay that overpayment to the Company with interest, compounded annually at the rate of 6%. However, the repayment provision in this paragraph does not apply to legal actions in which you claim that your release of ADEA claims was not knowing and voluntary.

This paragraph 13 does not apply to any thing of value given to you for which you actually performed services and by law you are entitled to receive.

8

        14. This Agreement is not effective or binding on either party until fully signed by both parties. This Agreement will be binding on and inure to the benefit of any successors to the Company.

9

EX-10

Exhibit 10.24

In connection with his hire as President, CIGNA Retirement & Investment Services in 2002, John Kim received from CIGNA:

• a stock option award in February, 2002 with a Black-Scholes value of $1,500,000;

•  transition awards under CIGNA’s Long-term Incentive Plan of 6,670 units to be paid in May, 2003 guaranteed at no less than $150 per unit, or $1,000,000, and 13,335 units to be paid in May, 2004 under the formula provided by the Plan, which provides a target value of $75 per unit, or $1,000,000; and

• a signing bonus of $50,000.

EX-12

Exhibit 12     

CIGNA CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)

	Year ended December 31,
	2002			2001			2000		1999		1998
Income (loss) from continuing operations
before income taxes (benefits)	$	(569	)	$	1,469		$	1,487	$	1,224	$	1,841
Adjustments:
Loss (income) from equity investees		4			(79	)		-		-		-
Minority interest		-			-			53		31		-
Income (loss) from continuing operations before
income taxes (benefits), as adjusted	$	(565	)	$	1,390		$	1,540	$	1,255	$	1,841
Fixed charges included in income:
Interest expense	$	121		$	118		$	104	$	116	$	126
Interest portion of rental expense		52			50			43		50		62
		173			168			147		166		188
Interest credited to contractholders		1,036			1,071			1,017		975		1,002
	$	1,209		$	1,239		$	1,164	$	1,141	$	1,190
Income available for fixed charges
(including interest credited to
contractholders)	$	644		$	2,629		$	2,704	$	2,396	$	3,031
Income available for fixed charges
(excluding interest credited to
contractholders) (1)	$	-		$	1,558		$	1,687	$	1,421	$	2,029
RATIO OF EARNINGS TO FIXED CHARGES:
Including interest credited to
contractholders(1)		-			2.1			2.3		2.1		2.5
SUPPLEMENTAL RATIO:
Excluding interest credited to
contractholders(1)		-			9.3			11.5		8.6		10.8

(1) Due to the loss in 2002, the ratio coverage was less than 1:1. CIGNA must generate additional earnings of $565 million to achieve a coverage of 1:1.

EX-13

Highlights

(Dollars in millions, except per share amounts)		2002			2001			2000			1999			1998
Revenues
Premiums and fees and other revenues	$	16,870		$	15,940		$	16,579		$	15,304		$	14,044
Net investment income		2,716			2,842			2,940			2,958			3,114
Realized investment gains (losses)		(238	)		(175	)		7			8			134
Total revenues	$	19,348		$	18,607		$	19,526		$	18,270		$	17,292
Results of Operations
Operating income (loss):
Employee Health Care, Life and Disability Benefits	$	579		$	730		$	756		$	714		$	590
Employee Retirement Benefits and Investment    Services		231			221			257			265			248
International Life, Health and Employee Benefits		31			95			48			(342	)		17
Run-off Reinsurance Operations		(1,070	)		57			(119	)		35			15
Other Operations		74			76			93			104			314
Corporate		(87	)		(96	)		(58	)		(78	)		(97	)
Total operating income (loss)		(242	)		1,083			977			698			1,087
Realized investment gains (losses), net of taxes		(155	)		(112	)		4			4			88
Income (loss) from continuing operations		(397	)		971			981			702			1,175
Income (loss) from discontinued operations		(1	)		18			6			1,163			117
Cumulative effect of accounting change, net of taxes		-			-			-			(91	)		-
Net income (loss)	$	(398	)	$	989		$	987		$	1,774		$	1,292
Net income (loss) excluding goodwill amortization	$	(398	)	$	1,037		$	1,035		$	1,822		$	1,340
Income (loss) per share from continuing operations:
Basic	$	(2.83	)	$	6.57		$	6.14		$	3.61		$	5.57
Diluted	$	(2.83	)	$	6.47		$	6.04		$	3.56		$	5.50
Net income (loss) per share:
Basic	$	(2.83	)	$	6.69		$	6.18		$	9.12		$	6.12
Diluted	$	(2.83	)	$	6.59		$	6.08		$	8.99		$	6.05
Common dividends declared per share	$	1.32		$	1.28		$	1.24		$	1.20		$	1.15
Total assets	$	88,950		$	91,589		$	95,088		$	95,333		$	95,890
Long-term debt	$	1,500		$	1,626		$	1,162		$	1,357		$	1,425
Shareholders' equity	$	3,867		$	5,055		$	5,413		$	6,149		$	8,277
Per share	$	27.75		$	35.71		$	35.61		$	36.24		$	40.25
Common shares outstanding (in thousands)		139,370			141,553			152,005			169,697			205,650
Shareholders of record		9,945			10,437			10,947			11,716			12,441
Employees		41,200			44,600			43,200			41,900			49,900

Operating income (loss) is defined as net income (loss) excluding: 1) after-tax realized investment results, 2) results of discontinued operations, and 3) in 1999, the cumulative effect of adopting Statement of Position 97-3, “Accounting by Insurance and Other Enterprises for Insurance-Related Assessments.” For more information regarding the effect of adopting accounting pronouncements, see Note 2(B) in the Notes to the Financial Statements. Operating income (loss) is the measure of profitability used by CIGNA in evaluating segment results. It excludes the effects of realized gains and losses attributable to CIGNA’s investment portfolio to present the underlying results of operations of CIGNA’s businesses. Operating income (loss) is not determined in accordance with generally accepted accounting principles (GAAP) and should not be viewed as a substitute for net income determined in accordance with GAAP. Other companies may define operating income (loss) differently than does CIGNA.

In January 2003, CIGNA sold the operations of Lovelace Health Systems, Inc., an integrated health care system and subsidiary of CIGNA. This business has been reported as discontinued operations. Prior year financial information has been reclassified.

In 1999, CIGNA sold its domestic and international property and casualty business and reported this business as discontinued operations.

17

Management's Discussion and Analysis of
Financial Condition and Results of Operations

INDEX
Consolidated Results of Operations	18
Other Matters	20
Employee Health Care, Life and Disability Benefits	27
Employee Retirement Benefits and Investment Services	29
International Life, Health and Employee Benefits	30
Run-off Reinsurance Operations	31
Other Operations	34
Corporate	34
Discontinued Operations	34
Liquidity and Capital Resources	35
Investment Assets	38
Market Risk of Financial Instruments	40
Cautionary Statement	42

CONSOLIDATED RESULTS OF OPERATIONS

(In millions)
Financial Summary	2002			2001			2000
Premiums and fees	$	15,737		$	14,860		$	15,862
Net investment income		2,716			2,842			2,940
Other revenues		1,133			1,080			717
Realized investment gains
(losses)		(238	)		(175	)		7
Total revenues		19,348			18,607			19,526
Benefits and expenses		19,917			17,138			18,039
Income (loss) from continuing
operations before taxes
(benefits)		(569	)		1,469			1,487
Income taxes (benefits)		(172	)		498			506
Income (loss) from continuing
operations		(397	)		971			981
Less realized investment gains
(losses), net of taxes		(155	)		(112	)		4
Operating income (loss)	$	(242	)	$	1,083		$	977
Income (loss) from continuing
operations	$	(397	)	$	971		$	981
Income (loss) from discontinued
operations		(1	)		18			6
Net income (loss)		(398	)		989			987
Adjustment to exclude goodwill
amortization in 2001 and 2000		--			48			48
Net income (loss) excluding
goodwill amortization	$	(398	)	$	1,037		$	1,035

Net Income (Loss)

Net income (loss) is determined in accordance with generally accepted accounting principles (GAAP), and includes both income (loss) from continuing operations and from discontinued operations. The net loss of $398 million in 2002, compared with net income of $1.0 billion (excluding goodwill amortization) in 2001, was primarily due to the following factors:

• charges of $1.0 billion after-tax in the run-off reinsurance operations as more fully described under “Other Matters”;

• lower net income in the Employee Health Care, Life and Disability Benefits segment due in part to an after-tax charge of $50 million related to health care provider litigation;

• lower recognized gains of approximately $100 million after-tax on sales of businesses;

• the absence of net income of $52 million from the Japanese life insurance operation, which was fully divested in the fourth quarter of 2001; and

• higher realized investment losses.

Net income in 2001 was essentially level with 2000, primarily reflecting higher recognized gains on sales of businesses, offset by realized investment losses.

18

Operating Income (Loss)

CIGNA focuses on “operating income (loss)”  to evaluate segment results. Operating income (loss) is defined as net income (loss) excluding after-tax realized investment results and excluding the results of discontinued operations. Since operating income (loss) excludes the effects of realized gains and losses attributable to CIGNA’s investment portfolio, management believes it presents the underlying results of operations of CIGNA’s businesses.

The following table presents operating income (loss), as defined above, adjusted for certain items that are attributable to special circumstances (“adjusted operating income (loss)”). These items are identified in the table below and are further discussed under “Other Matters”  beginning on page 20. Management believes that adjustments for these items present a clearer picture of underlying results of operations which management believes will be helpful to the reader. Operating income (loss) and adjusted operating income (loss) are not determined in accordance with GAAP and should not be viewed as a substitute for net income (loss) determined in accordance with GAAP. Other companies may define these terms differently than does CIGNA.

(In millions)	2002			2001			2000
Operating income (loss)	$	(242	)	$	1,083		$	977
Losses on specialty life
reinsurance contracts		720			--			84
Charge for Unicover and London
reinsurance matters		317			--			--
Restructuring costs*		95			62			--
Health care provider litigation		50			--			--
Accelerated recognition of
portion of deferred gain on
sale of life reinsurance
business		(3	)		(69	)		--
Gain on sales of interests in
Japanese life insurance
operation		--			(35	)		--
Charges (credit) for the
events of September 11, 2001		(2	)		25			--
Charges for the run-off
reinsurance business		--			--			43
Adjusted operating income		935			1,066			1,104
Adjustment to exclude goodwill
amortization in 2001 and 2000		--			48			48
Adjusted operating income
(excluding goodwill
amortization)	$	935		$	1,114		$	1,152

* Restructuring costs in 2002 reflect charges of $97 million after-tax associated with the cost reduction program adopted in the fourth quarter of 2002, and a reduction of $2 million after-tax in the costs associated with the fourth quarter 2001 restructuring program.

Adjusted operating income (excluding goodwill amortization in 2001) decreased 16% in 2002 primarily due to:

• lower earnings in the Employee Health Care, Life and Disability Benefits segment;

• lower earnings in the International Life, Health and Employee Benefits segment (because CIGNA sold its interest in the Japanese life insurance operation in 2001); and

• higher losses in the Run-off Reinsurance Operations segment.

Adjusted operating income (excluding goodwill amortization in 2001 and 2000) decreased 3% in 2001 primarily due to lower results in Corporate, the Employee Retirement Benefits and Investment Services segment, the Run-off Reinsurance Operations segment and Other Operations. These declines were partially offset by increased adjusted operating income in the Employee Health Care, Life and Disability Benefits segment and, to a lesser extent, improved results in the International Life, Health and Employee Benefits segment. Segment results are discussed in more detail below.

Realized Investment Results

The increase in realized investment losses in 2002 primarily reflects:

• higher losses on sales of fixed maturities;

• losses on sales of equity securities compared to gains in 2001; and

• higher impairments on equity securities and real estate investments.

These losses were partially offset by gains on sales of real estate investments and lower impairments on investments in collateralized debt obligations, which are secured by pools of corporate debt obligations. Further information regarding collateralized debt obligations is presented on page 39.

The decline in realized investment results in 2001 reflects higher losses from impairments on fixed maturities. These losses include $84 million after-tax ($129 million pre-tax) for investments in collateralized debt obligations. The decline also reflects losses of $14 million after-tax ($22 million pre-tax) for investments in securities of Enron Corporation.

For additional information, see Note 9(B) to the Financial Statements. The weakness in certain sectors of the economy is likely to cause additional investment losses. Refer to "Investment Assets" beginning on page 38 for further information.

19

Recent Stock Market Declines

The performance of equity markets can have a significant effect on CIGNA’s businesses and recent declines in equity markets have had an adverse effect on CIGNA. See, for example, pages 31 through 33 for a discussion of the charge related to certain specialty life reinsurance contracts, which primarily resulted from equity market declines. In addition, assets under management are a determinant of earnings for the retirement business, and a reduction in asset values reduces asset-based fees for that business. (See page 30 for further information).

Equity securities also comprise a key portion of the assets of CIGNA’s pension plans. CIGNA increased its minimum pension liability in the fourth quarter of 2002, based on the effect of equity market declines on the value of pension plan assets and reduced long-term interest rates, resulting in an after-tax charge to equity of $638 million. See Note 14 to the Financial Statements for additional information on CIGNA’s pension plans.

Revenues

Consolidated revenues, excluding realized investment results, were $19.6 billion in 2002, $18.8 billion in 2001 and $19.5 billion in 2000. The increase in 2002 primarily reflects higher Health Maintenance Organization (HMO) and medical indemnity premiums and fees due to rate increases.

The decline in 2001 consolidated revenues is primarily attributed to:

• the reduction of revenues in the International Life, Health and Employee Benefits segment resulting from the deconsolidation of the Japanese life insurance operation (see further discussion below in “Other Matters”); and

• CIGNA’s continuing operations exit from all but one Medicare market in the Employee Health Care, Life and Disability Benefits segment.

Excluding the effects of these two matters, consolidated revenues increased 6% in 2001. This increase is primarily due to growth in the Employee Health Care, Life and Disability Benefits segment resulting from HMO and medical indemnity rate increases and membership growth.

Outlook for 2003

Subject to the factors noted in the Cautionary Statement on page 42, management expects full year adjusted operating income in 2003 to be lower than 2002 adjusted operating income of $935 million, which excludes items attributable to special circumstances (presented in the table on page 19). This outlook for 2003 primarily reflects expected lower earnings in the health care operations due to:

• lower expected membership levels; and

• higher expected expenses per member, for customer service and technology including costs to comply with the requirements of the Health Insurance Portability and Accountability Act of 1996 (see page 25).

OTHER MATTERS

Charges for the Run-off Reinsurance Operations

In 2002, CIGNA recognized an after-tax charge of $720 million ($1.1 billion pre-tax) to strengthen reserves related to certain specialty life reinsurance contracts and the adoption of a program to substantially reduce equity market risks related to these contracts. CIGNA also recognized an after-tax charge of $317 million ($408 million pre-tax) in 2002 for Unicover and other run-off reinsurance exposures, including London reinsurance business. In 2000, CIGNA recorded an after-tax charge of $127 million ($195 million pre-tax) principally for the run-off specialty life and personal accident reinsurance contracts. See the Run-off Reinsurance Operations segment beginning on page 31 for further information on these charges.

Restructuring Programs

Fourth quarter 2002 program. In the fourth quarter of 2002, CIGNA adopted a restructuring program primarily to realign the organizational structure and operations of its health care business. As a result, CIGNA recognized in operating expenses an after-tax charge of $97 million ($151 million pre-tax) in the Employee Health Care, Life and Disability Benefits segment. The after-tax charge consisted of $74 million of severance costs ($116 million pre-tax), $22 million in real estate costs ($34 million pre-tax) related to vacating certain leased facilities and $3 million ($4 million pre-tax) of asset impairment charges. These amounts were partially offset by a reduction in costs of $2 million after-tax ($3 million pre-tax) for other postretirement benefits for employees terminated in 2002. This benefit cost reduction will continue in 2003 as additional employees are terminated, aggregating approximately $11 million after-tax ($17 million pre-tax).

The severance charge reflected the expected reduction of approximately 3,900 employees. As part of the plan, CIGNA expects to hire approximately 650 employees to support newly consolidated operations, thereby resulting in a net reduction of approximately 3,250 employees under this program. As of December 31, 2002, approximately 700 employees had been terminated under the program. As of December 31, 2002, CIGNA had paid $4 million related to severance under this program.

CIGNA expects this restructuring program to be substantially completed by year end 2003 and does not expect cash outlays under this program to have a significant effect on liquidity. CIGNA expects the program to result in net annual after-tax savings of approximately $100 million in 2003 and approximately $150 million beginning in 2004, reflecting the elimination of salary costs for terminated employees and lower facility costs.

20

The table below shows CIGNA’s restructuring activity (pre-tax) related to severance and real estate for this program:

	Severance
(Dollars in millions)	No. of Employees			Cost			Real Estate			Total Charge
Fourth quarter 2002
charge		3,890		$	116		$	38		$	154
Fourth quarter 2002
activity:
Employees		(713	)		(4	)					(4	)
Lease costs								--			--
Asset write-downs								(4	)		(4	)
Balance as of
December 31, 2002		3,177		$	112		$	34		$	146

Fourth quarter 2001 program. In the fourth quarter of 2001, CIGNA adopted a restructuring program primarily to consolidate existing health service centers into regional service centers. As a result, CIGNA recognized in operating expenses an after-tax charge of $62 million ($96 million pre-tax) in the Employee Health Care, Life and Disability Benefits segment. The after-tax charge consisted of $31 million of severance costs ($48 million pre-tax) and $31 million in real estate costs ($48 million pre-tax) related to vacating certain leased facilities.

The severance charge reflected the expected reduction of approximately 3,100 employees. As a result of the consolidation of health service centers, CIGNA hired approximately 1,100 employees, thereby resulting in a net reduction of approximately 2,000 employees under this program. As of December 31, 2002, approximately 2,800 employees had been terminated under the program (2,366 employees were terminated in 2002). The real estate charges consisted of $37 million pre-tax related to vacating leased facilities, which are cash obligations pertaining to non-cancelable lease obligations and lease termination penalties. The charge also included $11 million pre-tax of non-cash asset write-downs. As of December 31, 2002, CIGNA had paid $44 million related to severance and vacating leased facilities under this program ($38 million was paid in 2002).

This restructuring program was substantially completed in the fourth quarter of 2002. Cash outlays under this program did not result in, nor are the remaining cash outlays expected to have, a significant effect on CIGNA’s liquidity. CIGNA expects the program to result in net annual after-tax savings of $45-$55 million, reflecting the elimination of salary costs for terminated employees and lower facility costs, partially offset by salary costs for new employees in the regional service centers and higher expenses associated with technology improvement initiatives. CIGNA expects savings from the program to be fully realized beginning in 2003. As a result of additional technology enhancement expenses and other expenses associated with the restructuring program, CIGNA did not achieve significant savings in 2002 from this restructuring program.

The table below shows CIGNA’s restructuring activity (pre-tax) for this program:

	Severance
(Dollars in millions)	No. of Employees			Cost			Real Estate			Total Charge
Fourth quarter 2001   charge		3,100		$	48		$	48		$	96
Fourth quarter 2001
activity:
Employees		(436	)		(5	)					(5	)
Lease costs								(1	)		(1	)
Asset write-downs								(11	)		(11	)
Balance as of
December 31, 2001		2,664			43			36			79
2002 activity:
Employees		(2,366	)		(36	)					(36	)
Lease costs								(2	)		(2	)
Adjustment of
remaining balance		(143	)		7			(11	)		(4	)
Balance as of
December 31, 2002		155		$	14		$	23		$	37

During 2002, CIGNA made certain adjustments associated with this restructuring program, resulting in a net adjustment of $4 million pre-tax ($2 million after-tax).

Acquisitions and Dispositions

Over the long term, CIGNA’s priorities for use of capital are internal growth, acquisitions and share repurchase. Given the capital needs of CIGNA’s principal subsidiary (Connecticut General Life Insurance Company) primarily resulting from the charges for the run-off reinsurance operations (see pages 31 through 33), CIGNA intends to retain capital and has suspended share repurchase. CIGNA conducts regular strategic and financial reviews of its businesses to ensure that its capital is used effectively. As a result of these reviews, CIGNA may from time to time acquire or dispose of assets, subsidiaries or lines of business. Significant transactions are described below.

Sale of Lovelace Health Systems. In January 2003, CIGNA sold the operations of Lovelace Health Systems, Inc. (Lovelace), an integrated health care system located in New Mexico that includes a multi-specialty physician group practice, a hospital, family practice clinics and a health plan, for cash proceeds of approximately $210 million. The sale generated an after-tax gain of approximately $30 million which will be recognized in the first quarter of 2003. In the fourth quarter of 2002, CIGNA began reporting this business as discontinued operations and prior year financial information has been reclassified.

During 2002, CIGNA increased reserves for a Medicare cost reporting matter associated with Lovelace (see page 26) by $9 million after-tax ($14 million pre-tax). In the fourth quarter of 2002, Lovelace entered into a settlement agreement with the federal government related to this matter. This charge is included in results of discontinued operations.

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Sale of Brazilian health care operations. In January 2003, CIGNA sold its Brazilian health care operations. CIGNA expects to record a net gain of approximately $15 million after-tax in the first quarter of 2003 associated with this sale, primarily as a result of the disposition of the net liabilities associated with these operations. The gain will be reported as part of discontinued operations. Revenues, expenses and results of operations of the Brazilian health care operations are not material to CIGNA’s consolidated financial statements.

Sales of interests in Japanese life insurance operation. CIGNA sold its remaining interest in its Japanese life insurance operation in 2001. See the International Life, Health and Employee Benefits section on page 30 for further discussion.

Sale of portions of U.S. life reinsurance business. As of June 1, 2000, CIGNA sold its U.S. individual life, group life and accidental death reinsurance business for cash proceeds of approximately $170 million. The sale generated an after-tax gain of approximately $85 million, but recognition of that gain was deferred because the sale was structured as an indemnity reinsurance arrangement.

During 2002 and 2001, the acquirer entered into agreements with the reinsured parties, relieving CIGNA of any remaining obligations to those parties. As a result, CIGNA accelerated the recognition of $3 million after-tax of the deferred gain in 2002 and $69 million after-tax in 2001. In addition to the accelerated gain recognition, CIGNA recognized less than $1 million after-tax of the deferred gain in the Run-off Reinsurance Operations segment in 2002, compared with $9 million after-tax in 2001. The remaining deferred gain as of December 31, 2002, was approximately $1 million after-tax.

CIGNA has placed its remaining reinsurance businesses (including its accident, domestic health, international life and health, and specialty life reinsurance businesses) into run-off and has stopped underwriting new reinsurance business. As discussed in the Run-off Reinsurance Operations section beginning on page 31, CIGNA recorded after-tax charges in 2002 and 2000 related to the run-off reinsurance business.

Events of September 11, 2001

As a result of claims arising from the events of September 11, 2001, CIGNA recorded after-tax charges of $25 million in 2001. These charges, which are net of reinsurance, primarily related to life, accident and disability claims and, to a lesser extent, higher utilization of managed behavioral health services. These charges were reported by segment as follows: Employee Health Care, Life and Disability Benefits, $20 million; Employee Retirement Benefits and Investment Services, $3 million; and Run-off Reinsurance Operations, $2 million. During the fourth quarter of 2002, CIGNA revised its estimate of liabilities associated with the events of September 11, 2001, and recognized an after-tax credit of $2 million in the Run-off Reinsurance Operations segment.

Critical Accounting Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Management considers an accounting estimate to be critical if:

• it requires assumptions to be made that were uncertain at the time the estimate was made; and                

• changes in the estimate or different estimates that could have been selected could have a material impact on CIGNA’s consolidated results of operations or financial condition.

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The table that follows presents information about CIGNA’s most critical accounting estimates, as well as the effects of hypothetical changes in the material assumptions used to develop each estimate.

Balance Sheet Caption / Nature of Critical Estimate Item	Assumptions / Approach Used	Effect if Different Assumptions Used
Future policy benefits –   Variable annuity death benefits Reserves for these liabilities are estimates of the present value of net amounts expected to be paid, less the present value of net future premiums expected to be received. The amounts to be paid represent the excess of the guaranteed death benefit over the values of annuitants’ accounts. The death benefits coverage in force at December 31, 2002 (representing the amount payable if all annuitants had died as of that date) was approximately $23.4 billion.	Management estimates these reserves based on assumptions and other considerations, including lapse, partial surrender, mortality, interest rates and volatility. These are based on CIGNA’s experience and future expectations. CIGNA monitors actual experience to update these reserve estimates as necessary. Lapse refers to the full surrender of an annuity prior to an annuitant’s death. Partial surrender refers to the fact that most annuitants have the ability to withdraw substantially all of their mutual fund investments while retaining any available death benefit coverage in effect at the time of the withdrawal. A very small percentage of annuitants have elected partial surrenders to date. Volatility refers to market volatility that affects the costs of the program adopted by CIGNA to reduce equity market risks associated with these liabilities. CIGNA recorded a $720 million after-tax charge ($1.1 billion pre-tax) in 2002 in connection with stock market declines and implementation of a risk reduction program for these liabilities. See further discussion beginning on page 32.	If a 10% unfavorable change were to occur for the following assumptions, the after-tax decrease in net income would be as follows: •   Mortality — $95 million •   Lapse — $70 million •   Volatility — $55 million An increase in CIGNA’s liabilities for variable annuity death benefits due to partial surrenders would depend on many factors, including financial market conditions prior to surrender and annuitant behavior. Management believes the current assumptions and other considerations used to estimate reserves for these liabilities are appropriate. However, if actual experience differs from the assumptions and other considerations (including lapse, partial surrender, mortality, interest rates and volatility) used in estimating reserves, the resulting change could have a material adverse effect on CIGNA’s consolidated results of operations, and in certain situations, could have a material adverse effect on CIGNA’s financial condition. The amounts would be reflected in the Run-off Reinsurance Operations segment.
Unpaid claims and claim expenses  –Unpaid claims for guaranteed    cost and retrospectively    experience-rated health care    products Unpaid claims for guaranteed cost and retrospectively experience-rated health care products include both reported claims and estimates for losses incurred but not yet reported.	Unpaid claims for guaranteed cost and retrospectively experience-rated health care products are estimated using actuarial models based on historical data for payment patterns, cost trends, product mix, seasonality, utilization of health care services and other relevant factors. Reserves for these liabilities for the year ended December 31 were as follows: •   2002 - $1.73 billion •   2001 - $1.52 billion •   2000 - $1.50 billion The above amounts reflect that portion of unpaid claims and claim expenses included in CIGNA’s consolidated balance sheets, which are attributable to guaranteed cost and retrospectively experience-rated health care operations. It excludes amounts for administrative services only business. The estimation process for determining liabilities for unpaid claims for health care products inherently results in adjustments each year for claims incurred (but not paid) in preceding years. During the year ended December 31, CIGNA’s net income was increased for such adjustments for prior year claims, as follows (amounts after-tax): •   2002 - $44 million •   2001 - $36 million •   2000 - $57 million	A 1% increase in the assumed cost trend would reduce net income by $35 million after-tax. This charge would impact the Employee Health Care, Life and Disability Benefits segment.

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Balance Sheet Caption / Nature of Critical Estimate Item	Assumptions / Approach Used	Effect if Different Assumptions Used
Reinsurance recoverables –   Reinsurance recoverables for   Run-off Reinsurance   Operations Collectibility of reinsurance recoverables requires an assessment of risks that such amounts will not be collected, including risks associated with reinsurer default and disputes with reinsurers regarding applicable coverage.	The amount of reinsurance recoverable, net of reserves, represents management’s best estimate of recoverability, including an assessment of the financial strength of reinsurers. The ultimate amounts received are dependent, in certain cases, on the resolution of disputes with reinsurers, including the outcome of arbitration proceedings. Net reinsurance recoverables for the Run-off Reinsurance Operations segment for the year ended December 31, were as follows: •   2002 - $765 million •   2001 - $938 million •   2000 - $895 million	A 10% reduction of net reinsurance recoverables at December 31, 2002, would reduce net income by $59 million after-tax. This charge would impact the Run-off Reinsurance Operations segment.
Investments – Fixed maturities   Recognition of losses from “other   than temporary” impairments of   public and private placement   fixed maturities Losses for “other than temporary” impairments of fixed maturities must be recognized in net income based on an estimate of fair value by management. Changes in fair value are reflected as an increase or decrease in shareholders’ equity. A decrease in fair value is recognized in net income when the decrease is determined to be “other than temporary.” Determining whether a decline in value is “other than temporary” includes an evaluation of the reasons for and the significance of the decrease in value of the security as well as the duration of the decrease.	Management estimates the amount of “other than temporary” impairment when a decline in value is expected to persist, using quoted market prices for public securities with active markets and the present value of future cash flows for private placement bonds. Expected future cash flows are based on historical experience of the issuer and management’s expectation of future performance. CIGNA recognized “other than temporary” impairments of investments in fixed maturities as follows (after-tax, excluding policyholder share*): •   2002 - $ 84 million •   2001 - $120 million •   2000 - $ 32 million	For all fixed maturities with cost in excess of their fair value, the excess of cost which has not been recognized in net income as of December 31, 2002, was $79 million, after-tax, excluding policyholder share*. For private placement bonds considered impaired, a decrease of 10% of all expected future cash flows for the impaired bonds would reduce net income by $10 million after-tax, excluding policyholder share*.

* Investment securities are attributable to CIGNA’s various business segments; amounts noted are presented from a consolidated perspective and are net of policyholder share (i.e., these amounts exclude the impact of gains and losses on investment assets related to experience-rated pension policyholders’ contracts because these amounts generally accrue to the policyholders).

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Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of CIGNA’s Board of Directors and the Audit Committee has reviewed the disclosure presented above relating to them.

In addition, there are other accounting estimates within CIGNA’s consolidated financial statements, including reserves for: unpaid claims and claim expenses and future policy benefits in CIGNA’s consolidated balance sheets other than those identified in the preceding table, post-employment and postretirement benefits, certain compensation accruals, and income and other tax exposures.

Management believes the current assumptions and other considerations used to estimate amounts reflected in CIGNA’s consolidated financial statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in CIGNA’s consolidated financial statements, the resulting changes could have a material adverse effect on CIGNA’s consolidated results of operations, and in certain situations, could have a material adverse effect on CIGNA’s financial condition.

See Note 2 to the Financial Statements for further information on key accounting policies that impact CIGNA.

Regulatory and Industry Developments

CIGNA’s businesses are subject to a changing social, economic, legal, legislative and regulatory environment. Some current issues that may affect CIGNA’s businesses include:

• initiatives to increase health care regulation;

• efforts to expand tort liability of health plans;

• class action lawsuits targeting health care companies, including CIGNA;

• initiatives to restrict insurance pricing and the application of underwriting standards; and

• efforts to revise federal tax laws, including proposals to change the federal tax treatment of dividends and of savings vehicles currently offered as employee benefits.

Health care regulation. Federal and state legislatures, administrative agencies and courts continue efforts to increase regulation of the health care industry and change its operational practices. Regulatory and operational changes could have an adverse effect on CIGNA’s health care operations if they reduce marketplace competition and innovation or result in increased medical or administrative costs without improving the quality of care. Debate at the federal level over “managed care reform” and “patients’ bill of rights” legislation, focusing on questions regarding liability, is expected to continue.

Privacy regulations under the Health Insurance Portability and Accountability Act (HIPAA) of 1996 cover all aspects of the health care delivery system, and address the use and disclosure of individually identifiable health care information. Compliance with the privacy regulations is required by April 2003. In addition to the privacy regulations, HIPAA establishes national electronic transaction standards, which apply to health insurers, providers and other covered entities. They are intended to improve the efficiency and effectiveness of the nation’s health care system by encouraging the widespread use of electronic data interchange. CIGNA must implement these standards by October 2003.

Regulations issued in February 2003 set standards for the security of electronic health information, and must be implemented by CIGNA by April 2005. CIGNA has implemented certain security measures and planned others in anticipation of these rules. Other proposed HIPAA regulations include standards for the assignment of a unique national identifier for each health plan and provider and requirements for a unique national identifier for employer groups. CIGNA has commenced significant systems enhancements, training and administrative efforts to satisfy these requirements. Incremental technology and business-related expenses associated with CIGNA’s compliance efforts were approximately $20 million after-tax in 2002 and are estimated to be approximately $60 million after-tax in 2003.

Other possible regulatory changes that could have an adverse effect on CIGNA’s health care operations include:

• additional mandated benefits or services that increase costs without improving the quality of care;

• narrowing of the Employee Retirement Income Security Act of 1974 (ERISA) preemption of state laws;

• changes in ERISA regulations resulting in increased administrative burdens and costs;

• additional restrictions on the use of prescription drug formularies;

• additional privacy legislation and regulations that interfere with the proper use of medical information for research, coordination of medical care and disease management;

• additional rules establishing the time periods for payment of health care provider claims that vary from state to state; and

• legislation that would exempt independent physicians from antitrust laws.

The health care industry is under increasing scrutiny by various state and federal government agencies and could be subject to government efforts to bring criminal actions in circumstances that could previously have given rise only to civil or administrative proceedings.

Litigation and other legal matters. CIGNA and several health care industry competitors were named as defendants in federal and state purported class action lawsuits. A Florida federal court has certified a class of health care providers who allege violations under the Racketeer Influenced and Corrupt Organizations Act and ERISA. CIGNA and the other defendants have appealed that decision. The Florida federal court denied class certification to health plan subscribers, and the plaintiffs have not filed an appeal of that decision.

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An Illinois state court certified a class action lawsuit against CIGNA by health care providers alleging breach of contract and seeking increased reimbursements. This state claim was removed to federal court in Illinois, where a settlement agreement between the parties was filed on November 26, 2002. If approved, the agreement will encompass most of the claims brought on behalf of health care providers asserted in other state and federal jurisdictions. On February 21, 2003, the Judicial Panel for Multidistrict Litigation ordered the Illinois case to be transferred to the Florida federal court, which will decide whether the settlement should be approved. In connection with this matter, CIGNA recognized a charge of $50 million after-tax ($77 million pre-tax) in the fourth quarter of 2002, for expected costs associated with health care provider class action litigation. As this matter has not been resolved, adjustments to this amount in future periods are possible.

In 2002, CIGNA recognized a charge for the result of an arbitration ruling related to reinsurance (retrocessional) coverage of a workers’ compensation reinsurance pool. This charge also included a review of CIGNA’s exposures for the run-off reinsurance operations, including an assessment of London market retrocessional disputes and exposures. The underlying London market retrocessional disputes are not expected to be resolved for some time. CIGNA’s reserve balance is based on a current assessment of these matters, the outcomes of which could result in adjustments to CIGNA’s reserve. See also page 33 for further discussion.

The U.S. Attorney’s Office for the Eastern District of Pennsylvania is investigating compliance with federal laws in connection with pharmaceutical companies’ marketing practices and their impact on prices paid by the government to pharmaceutical companies for products under federal health programs. As part of this investigation, CIGNA is responding to subpoenas concerning contractual relationships between pharmaceutical companies and CIGNA’s health care operations.

In the fourth quarter of 2002, several purported class action lawsuits as well as two shareholder derivative complaints nominally on behalf of CIGNA were filed in federal court in the Eastern District of Pennsylvania against CIGNA and certain of its senior officers and directors alleging securities law violations and breaches of fiduciary duty. Another purported class action lawsuit has been filed against CIGNA and certain officers, also in the Eastern District of Pennsylvania, by an individual who seeks to represent a class of participants in the CIGNA 401(k) Plan who allegedly suffered losses on investments in CIGNA stock from May 2, 2001 to the present, asserting violations of ERISA. In addition, in the fourth quarter of 2002, the Securities and Exchange Commission notified CIGNA that it has opened an informal inquiry into matters relating to CIGNA.

The Department of Justice and Office of Inspector General of the Department of Health and Human Services investigated a subsidiary of CIGNA, Lovelace Health Systems, Inc., (Lovelace) regarding Medicare cost reporting practices for the years 1990 through 1999. In 2002, CIGNA increased reserves for this matter by $9 million after-tax ($14 million pre-tax). This matter was resolved in December 2002, by a settlement agreement between the parties. CIGNA sold its Lovelace subsidiary on January 15, 2003.

In the fourth quarter of 2002, a Connecticut federal court certified a class action lawsuit against CIGNA and the CIGNA Pension Plan. The plaintiffs are participants in the Plan who earned certain Plan benefits prior to 1998. The plaintiffs allege, among other things, that the Plan violated ERISA by impermissibly conditioning certain post-1997 benefit accruals on the amount of pre-1998 benefit accruals, and that these conditions are not adequately disclosed to Plan participants.

CIGNA is routinely involved in numerous lawsuits and other legal matters arising, for the most part, in the ordinary course of the business of administering and insuring employee benefit programs. An increasing number of claims are being made for substantial non-economic, extra-contractual or punitive damages. The outcome of litigation and other legal matters is always uncertain, and outcomes that are not justified by the evidence can occur. CIGNA believes that it has valid defenses to the legal matters pending against it and is defending itself vigorously. Nevertheless, it is possible that resolution of one or more of the legal matters currently pending or threatened could result in losses material to CIGNA’s consolidated results of operations, liquidity or financial condition.

Summary. The eventual effect on CIGNA of the changing environment in which it operates remains uncertain. For additional information on contingencies that could affect CIGNA’s results, see Note 21 to the Financial Statements.

Accounting Pronouncements

For information on recent accounting pronouncements, see Note 2(B) to the Financial Statements.

Segment Reporting Changes

For information regarding changes to CIGNA’s segment reporting, see Note 19 to the Financial Statements.

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EMPLOYEE HEALTH CARE, LIFE AND DISABILITY BENEFITS

(In millions)
Financial Summary	2002			2001			2000
Premiums and fees	$	14,336		$	13,459		$	12,959
Net investment income		558			599			604
Other revenues		925			686			581
Segment revenues		15,819			14,744			14,144
Benefits and expenses		14,954			13,624			12,976
Income before taxes		865			1,120			1,168
Income taxes		286			390			412
Operating income		579			730			756
Restructuring costs (in 2002 -
HMO, $64; Indemnity, $31; in
2001 - HMO, $34; Indemnity,
$28)		95			62			--
Health care provider
litigation (HMO, $26;
Indemnity, $24)		50			--			--
Charges for the events of
September 11, 2001 (HMO, $5;
Indemnity, $15)		--			20			--
Adjusted operating income		724			812			756
Adjustment to exclude goodwill
amortization in 2001 and 2000		--			48			48
Adjusted operating income
(excluding goodwill
amortization)	$	724		$	860		$	804
Realized investment gains
(losses), net of taxes	$	(84	)	$	(49	)	$	6

Adjusted Operating Income

Adjusted operating income (excluding goodwill amortization in 2001 and 2000) for the Employee Health Care, Life and Disability Benefits segment decreased 16% in 2002 and increased 7% in 2001.

CIGNA further separates this segment into HMO and Indemnity operations. HMO includes medical managed care and specialty health care operations such as managed behavioral health, medical cost and utilization management, managed dental, managed pharmacy programs and pharmaceutical fulfillment services. Indemnity includes medical and dental indemnity, and group disability, life and accident insurance operations.

Adjusted operating income (excluding goodwill amortization in 2001 and 2000) for the HMO and Indemnity operations was as follows:

(In millions)	2002		2001		2000
HMO operations	$	455	$	467	$	483
Indemnity operations		269		393		321
Total	$	724	$	860	$	804

HMO results (excluding goodwill amortization in 2001) decreased 3% in 2002 primarily due to:

• significantly lower earnings in HMO Administrative Services Only (ASO) programs, primarily resulting from higher operating expenses for customer service initiatives; and

• to a lesser extent, lower Medicare earnings.

These declines were partially offset by:

• significantly improved results in the specialty health care operations primarily due to business growth; and

• increased earnings in the guaranteed cost HMO business reflecting rate increases.

HMO results (excluding goodwill amortization in 2001 and 2000) decreased 3% in 2001 due to lower earnings in the guaranteed cost HMO business and in HMO ASO programs, in part, due to higher operating expenses for technology and customer service initiatives. The decline in the guaranteed cost HMO business also reflected higher medical costs primarily due to increased unit costs for, and higher use of, professional services, as well as inpatient and outpatient services. These declines were partially offset by higher earnings in the specialty health care operations and Medicare business in 2001.

Indemnity results (excluding goodwill amortization in 2001) decreased 32% in 2002 due to the following factors:

• significantly lower earnings in the experience-rated and guaranteed cost health care businesses primarily due to lower margins on new business, poor performance of certain large new accounts and margin deterioration on renewal business; and

• higher expenses for the indemnity health care business due to technology and customer service initiatives.

These declines in indemnity health care operations were partially offset by increased earnings in the long-term disability business, primarily due to higher rates and more favorable claim experience, and increased earnings in the group life insurance business resulting from lower expenses.

Indemnity results (excluding goodwill amortization in 2001 and 2000) increased 22% in 2001 reflecting improvements in results for:

• the long-term disability business, primarily due to higher rates and improved claims administration;

• the retrospectively experience-rated health care business, reflecting rate increases and higher membership;

• the guaranteed cost health care business, as a result of improved claim experience; and

• the ASO business, reflecting fee increases.

These improvements were partially offset by lower earnings in the group life insurance business in 2001.

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Organizational Realignment and Cost Reduction Initiatives

As a result of significantly lower earnings in its health care operations in 2002, CIGNA undertook a review of the health care organizational structure and operations with the objectives of:

• achieving additional operational efficiencies and improved accountability within the organization;

• strengthening underwriting processes;

• improving medical management, including network and provider contracting;

• improving customer service; and

• achieving additional cost reductions.

As a result of this review, CIGNA adopted a restructuring program in the fourth quarter of 2002, resulting in an after-tax charge of $97 million in the Employee Health Care, Life and Disability Benefits segment. See page 20 for further information about this restructuring program.

Premiums and Fees

Premiums and fees increased 7% in 2002 and 4% in 2001. Excluding premiums and fees for the Medicare business (CIGNA’s continuing operations exited all but one Medicare market effective January 1, 2001), premiums and fees increased 6% in 2002 and 9% in 2001. The increases were primarily due to HMO and medical indemnity rate increases and, in 2001, membership growth.

Premium Equivalents

In contrast to many other companies in the health care industry, a significant portion of CIGNA’s health care business consists of ASO programs where the customer self-funds all of their claims and minimum premium programs, where the customer self-funds a portion of their claims. Under ASO programs, the customer or plan sponsor, rather than CIGNA, assumes the risk for claim costs incurred.

Under minimum premium programs, the policyholder assumes the risk and self-funds claims up to a predetermined aggregate, maximum amount, and CIGNA bears the risk for claim costs incurred in excess of that amount.

Premium equivalents generally equal paid claims under ASO and minimum premium programs. CIGNA would have recorded the amount of these paid claims as additional premiums if these programs had been written as guaranteed cost or retrospectively experience-rated programs. “Adjusted premiums and fees,” which consists of premiums and fees plus premium equivalents, is a useful measure of volume in CIGNA’s health care operations because premium equivalents are an indicator of business volume associated with ASO and minimum premium programs. However, premium equivalents do not represent premium and fee revenue recognized under GAAP and may not be comparable to similarly titled measures presented by other companies.

Premiums and fees associated with ASO programs were $1.7 billion in 2002 and 2001 and $1.5 billion in 2000.

Premiums and fees associated with minimum premium programs were $287 million in 2002, $256 million in 2001 and $245 million in 2000.

Adjusted premiums and fees for the Employee Health Care, Life and Disability Benefits segment were as follows for the year ended December 31:

(In millions)	2002		2001		2000
Premiums and fees	$	14,336	$	13,459	$	12,959
Premium equivalents		22,714		20,230		17,782
Adjusted premiums and fees	$	37,050	$	33,689	$	30,741

Premiums and fees included $295 million for Medicare operations in 2002, $226 million in 2001 and $807 million in 2000. As indicated above, CIGNA’s continuing operations exited all but one Medicare market effective January 1, 2001.

The increases in premium equivalents in 2002 and 2001 are primarily due to higher medical costs in HMO and indemnity ASO and minimum premium programs that, in turn, increase the amount of paid claims. Membership growth in indemnity ASO programs also contributed to the overall increase in 2001.

Net Investment Income

Net investment income decreased 7% in 2002 and 1% in 2001 primarily due to lower yields and, in 2002, lower invested assets.

Other Revenues

Other revenues increased 35% in 2002 and 18% in 2001 primarily due to business growth in the specialty health care operations (predominantly in pharmaceutical fulfillment services and medical cost and utilization management services).

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Medical Membership

As of December 31, medical membership from continuing operations (excluding Medicare members) was as follows for the HMO and Indemnity operations:

(In millions)	2002	2001	2000
HMO	6.7	6.8	7.0
Indemnity (estimated)	6.3	6.4	6.1

HMO medical membership in 2002 reflects lower guaranteed cost HMO program membership, partially offset by growth in HMO ASO programs. HMO medical membership decreased 3% in 2001 due to lower membership in HMO ASO programs, partially offset by increased membership in the guaranteed cost HMO program. HMO medical membership for Medicare operations was 43,000 as of December 31, 2002, 35,000 as of December 31, 2001, and 104,000 as of December 31, 2000.

During 2002, CIGNA estimated the level of indemnity membership based on a revised factor (specifically, the factor used to estimate the number of covered lives per subscriber). The revised estimate reflects updated information resulting from recent technology enhancements. Prior period information has been revised using this updated information. There was no impact on revenues or operating income resulting from this change (revenues are derived based on the number of subscribers and the level of fees paid by those subscribers, rather than the number of members).

Indemnity medical membership decreased 2% in 2002 and increased 5% in 2001. The decline in 2002 primarily reflects cancellations in traditional indemnity programs. The increase in 2001 primarily reflects growth in medical PPO membership, partially offset by cancellations in traditional indemnity programs.

Business Mix

Business mix, as measured by adjusted premiums and fees, was as follows for the year ended December 31:

	2002	2001	2000
Medical indemnity and PPO	45%	45%	42%
HMO medical and dental	42%	40%	42%
Dental indemnity and PPO	7%	7%	7%
Life insurance	4%	5%	6%
Long-term disability insurance	1%	2%	2%
Other insurance coverages	1%	1%	1%

EMPLOYEE RETIREMENT BENEFITS AND INVESTMENT SERVICES

(In millions)
Financial Summary	2002			2001			2000
Premiums and fees	$	336		$	322		$	350
Net investment income		1,649			1,668			1,617
Segment revenues		1,985			1,990			1,967
Benefits and expenses		1,658			1,681			1,607
Income before taxes		327			309			360
Income taxes		96			88			103
Operating income		231			221			257
Charges for the events of
September 11, 2001		--			3			--
Adjusted operating income	$	231		$	224		$	257
Realized investment losses,
net of taxes	$	(68	)	$	(61	)	$	(1	)

Adjusted Operating Income

Adjusted operating income increased 3% in 2002 in the Employee Retirement Benefits and Investment Services segment primarily due to a favorable shift to higher margin products, business growth and effective expense management, partially offset by the negative effect of stock market declines.

The decrease in adjusted operating income of 13% in 2001 primarily reflects the negative effect of stock market declines, lower interest margins and higher operating expenses, partially offset by a shift to higher margin products.

Revenues

Premiums and fees are principally:

• asset management fees on separate account assets (fees on general account assets are netted against benefits, losses and settlement expenses);

• administrative charges on general and separate account assets;

• amounts earned from non-leveraged corporate life insurance; and

• premiums from single premium group annuity business.

Net investment income primarily represents earnings from general account assets. Most of this net investment income is credited to customers and included in benefits and expenses.

Premiums and fees increased 4% in 2002 primarily due to increased premiums from single premium group annuity business and non-leveraged corporate life insurance, partially offset by the effect of stock market declines on asset-based fees. Net investment income in 2002 declined 1% due to lower yields, partially offset by higher general account assets.

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The 8% decrease of premiums and fees in 2001 primarily reflects lower asset-based fees due to stock market declines and decreased single premium group annuity sales, partially offset by fee growth due to deposits in excess of withdrawals and a shift to higher margin products. Net investment income increased 3% primarily due to higher general account assets, partially offset by lower yields.

Assets Under Management

Assets under management are a determinant of earnings for this segment because a significant portion of this segment’s revenues is based on asset values. The following table shows assets under management and related activity, including amounts attributable to separate accounts for the year ended December 31. Assets under management fluctuate because of changes in the market value of fixed maturities and equity securities.

(In millions)		2002			2001
Balance--January 1	$	55,306		$	55,154
Premiums and deposits		8,797			10,154
Investment income		2,519			2,593
Decrease in fair value of assets		(4,207	)		(3,487	)
Customer withdrawals		(3,595	)		(3,122	)
Other, including participant
withdrawals and benefit
payments		(5,063	)		(5,986	)
Balance--December 31	$	53,757		$	55,306

Changes in assets under management are discussed below.

Premiums and deposits. The decline in deposits in 2002 was primarily due to several large defined contribution and defined benefit deposits in 2001. In 2002, approximately 67% of premiums and deposits were from existing customers, and 33% were from sales to new customers and new plan sales to existing customers.

In 2001, approximately 54% of premiums and deposits were from existing customers, and 46% were from sales to new customers and new plan sales to existing customers.

Investment income. Investment income decreased 3% in 2002 primarily due to lower yields.

Fair value of assets. The declines in fair value in 2002 and 2001 are primarily attributable to market value depreciation of equity securities in separate accounts.

Other Matters

Split-dollar life insurance. Recently proposed regulations by the Internal Revenue Service and statutory changes may result in withdrawals of assets, policy terminations and fewer sales of new policies. Approximately $5 million in operating income in 2002 was associated with these policies.

INTERNATIONAL LIFE, HEALTH AND EMPLOYEE BENEFITS

(In millions)
Financial Summary	2002		2001			2000
Premiums and fees	$	811	$	788		$	2,042
Net investment income		51		49			148
Other revenues		3		148			4
Segment revenues		865		985			2,194
Benefits and expenses		816		838			2,120
Income before taxes		49		147			74
Income taxes		18		52			26
Operating income		31		95			48
Gain on sales of interests in
Japanese life insurance
operation		--		(35	)		--
Adjusted operating income	$	31	$	60		$	48
Realized investment gains (losses), net of taxes	$	4	$	(3	)	$	--

Adjusted Operating Income

Adjusted operating income in the International Life, Health and Employee Benefits segment declined 48% in 2002 because the 2001 results include CIGNA’s share in the earnings of the Japanese life insurance operation which was fully divested in the fourth quarter of 2001. Adjusted operating income for the Japanese life insurance business (which excludes the gain on sales) was $52 million in 2001 and $56 million in 2000.

Excluding the operating results of the Japanese life insurance operation, adjusted operating income was $31 million in 2002, $8 million in 2001 and a loss of $8 million in 2000. On this basis, the increases in adjusted operating income were primarily attributable to:

• improved results for employee benefit products provided to expatriate employees of multinational companies;

• improved results in the life, accident and health operations (primarily in Asia); and

• lower health care losses in 2002.

Japanese Life Insurance Operation

In 2001, CIGNA sold portions of its interest in its Japanese life insurance operation as follows:

Date of Sale	Portion of CIGNA Equity Ownership Interest Sold*		Equity Ownership Interest Retained by CIGNA*		Proceeds from Sale (in millions)		Gain on Sale, after- tax (in millions)
Jan. 2001		21%		40%	$	83	$	8
Nov. 2001		40%		--	$	267	$	27

* Prior to the January 2001 sale, CIGNA owned 61% of the Japanese life insurance operation.

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As a result of the January 2001 sale, CIGNA stopped consolidating the assets, liabilities, revenues and expenses of this operation and, until the November 2001 sale, accounted for its remaining interest under the equity method of accounting.

Premiums and Fees

Premiums and fees increased 3% in 2002 reflecting:

• higher premiums and fees for health care and other employee benefit products for expatriate employees of multinational companies; and

• growth in the life, accident and health operations in Asia.

Premiums and fees decreased 61% in 2001 due to the fact that CIGNA did not consolidate the Japanese life insurance operation in 2001, which had premiums and fees of $1.4 billion in 2000. Excluding premiums and fees for the Japanese life insurance operation, premiums and fees increased 14% in 2001 due to the same factors as noted above.

Other Revenues

Other revenues in 2001 include CIGNA’s share in the earnings of the Japanese life insurance operation ($80 million pre-tax), which was accounted for under the equity method of accounting from January 2001 until its sale in November 2001. Other revenues in 2001 also include a pre-tax gain of $54 million ($35 million after-tax) associated with the sales of CIGNA’s interests in this operation.

International Expansion

CIGNA expects to pursue international growth through acquisitions, joint ventures and other investments. Such projects inevitably involve start-up costs that could result in initial losses for those operations.

RUN-OFF REINSURANCE OPERATIONS

(In millions)
Financial Summary	2002			2001			2000
Premiums and fees	$	138		$	148		$	365
Net investment income		44			52			63
Other revenues		91			120			12
Segment revenues		273			320			440
Benefits and expenses		1,831			232			623
Income (loss) before taxes
(benefits)		(1,558	)		88			(183	)
Income taxes (benefits)		(488	)		31			(64	)
Operating income (loss)		(1,070	)		57			(119	)
Losses on specialty life
reinsurance contracts		720			--			84
Charge for Unicover and
London reinsurance matter		317			--			--
Accelerated recognition of
portion of deferred gain on
sale of life reinsurance
business		(3	)		(69	)		--
Charges (credit) for the
events of September 11,
2001 (see page 22)		(2	)		2			--
Charges for the run-off
reinsurance business		--			--			43
Adjusted operating income
(loss)	$	(38	)	$	(10	)	$	8
Realized investment losses,
net of taxes	$	(6	)	$	(9	)	$	(2	)

Adjusted Operating Income (Loss)

Adjusted operating income (loss) in the Run-off Reinsurance Operations segment deteriorated in 2002 and 2001. The 2002 decline was primarily due to lower amortization of the deferred gain on sale of the life reinsurance business and reserve strengthening associated with the workers’ compensation reinsurance business. Both 2002 and 2001 results were negatively affected by a decline in premiums and net investment income.

Premiums and Fees

Premiums and fees in 2002 include $47 million pre-tax of ceded premium to be returned to CIGNA as a result of the Unicover arbitration ruling (see further discussion below). Excluding this amount, premiums and fees decreased 39% in 2002 to $91 million, and decreased 59% in 2001. These declines reflect the continuing run-off of the reinsurance business.

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Other Revenues

As discussed further below in 2002, CIGNA implemented a program to substantially reduce the equity market exposures for certain specialty life reinsurance contracts by selling exchange-traded futures contracts. Other revenues in 2002 include an $87 million pre-tax gain from these futures contracts. A corresponding expense reflecting the increase in liabilities for the specialty life reinsurance contracts is included in benefits, losses and settlement expenses. Excluding the gain on futures contracts, other revenues decreased 97% in 2002 due to the expected reduction in accelerated gain recognition of portions of the deferred gain on the sale of the life reinsurance business.

The increase in other revenues in 2001 is primarily due to the accelerated recognition of $107 million pre-tax ($69 million after-tax) of portions of the deferred gain on sale of the life reinsurance business. See page 22 for further discussion of this sale and the related gain recognition.

Other Matters

Losses on specialty life reinsurance contracts. In 2002, CIGNA recognized an after-tax charge of $720 million ($1.1 billion pre-tax) to strengthen reserves related to certain specialty life reinsurance contracts and the adoption of a program to substantially reduce equity market risks related to these contracts.

CIGNA’s reinsurance operations, which were discontinued in 2000 and are now an inactive business in run-off mode, reinsured a guaranteed minimum death benefit under certain variable annuities issued by other insurance companies. These variable annuities are essentially investments in mutual funds combined with a death benefit. Death benefits under the annuity contracts reinsured by CIGNA are determined using various methods.

The majority of CIGNA’s exposure arises under annuities that guarantee that the benefit received at death will be no less than the highest historical account value of the related mutual fund investments on an annuitant’s contract anniversary date. Under this type of death benefit, CIGNA is liable to the extent the highest historical anniversary account value exceeds the fair value of the related mutual fund investments at the time of an annuitant’s death. Other annuity designs that CIGNA reinsured guarantee that the benefit received at death will be no less than net deposits paid into the contract accumulated at a specified rate or net deposits paid into the contract. In periods of declining equity markets and in periods of flat equity markets following a decline, CIGNA’s liabilities for these guaranteed minimum death benefits increase.

As a result of equity market declines and volatility in 2002, CIGNA evaluated alternatives for addressing the exposures associated with these reinsurance contracts, considering the possibility of continued depressed equity market conditions, the potential effects of further market declines and the impact on future earnings and capital. As a result of this evaluation, CIGNA implemented a program to substantially reduce the equity market exposures of this business by selling exchange-traded futures contracts and, potentially, other instruments, which are expected to rise in value as the equity market declines and decline in value as the equity market rises.

The purpose of this program is to substantially reduce the adverse effects of potential future stock market declines on CIGNA’s liabilities for certain reinsurance contracts, as increases in liabilities under the reinsurance contracts from a declining market will be substantially offset by gains on the futures contracts. A consequence of this program is that it also substantially reduces the positive effects of potential future equity market increases, as reductions in liabilities under these contracts from improved equity market conditions will be substantially offset by losses on the futures contracts.

In order to achieve the objective of this program, CIGNA expects to adjust its futures contract position and possibly enter into other positions over time to reflect changing equity market levels and changes in the investment mix of the underlying variable annuity investments.

The $720 million after-tax charge consists of:

• $620 million after-tax, principally reflecting the reduction in assumed future equity market returns as a result of implementing the program and, to a lesser extent, changes to the policy lapse, mortality, market volatility and interest rate assumptions used in estimating the liabilities for these contracts. CIGNA determines liabilities under the reinsurance contracts using an assumption for expected future performance of equity markets. A consequence of implementing the program is, effectively, a reduction in the assumption for expected future performance of equity markets, as the futures contracts essentially eliminate the opportunity to achieve previously expected market returns; and

• $100 million after-tax reflecting deterioration in equity markets that occurred in the third quarter of 2002 (prior to implementation of the program).

As noted in Other Revenues above, CIGNA recorded a pre-tax gain of $87 million in other revenues in 2002 to reflect the increase in the fair values of futures contracts since the inception of the program. A corresponding expense reflecting the increase in liabilities for the specialty life reinsurance contracts is included in benefits, losses and settlement expenses.

CIGNA had reserves for these liabilities of approximately $1.4 billion as of December 31, 2002, and approximately $300 million as of December 31, 2001.

Management estimates reserves for variable annuity death benefit exposure based on assumptions and other considerations, including lapse, partial surrender, mortality, interest rates and volatility. These are based on CIGNA’s experience and future expectations. CIGNA monitors actual experience to update these reserve estimates as necessary.

32

Lapse refers to the full surrender of an annuity prior to an annuitant’s death. Volatility refers to market volatility that affects the costs of the program adopted by CIGNA to reduce equity market risks associated with these liabilities.

Partial surrender refers to the fact that most annuitants have the ability to withdraw substantially all of their mutual fund investments while retaining any available death benefit coverage in effect at the time of the withdrawal. A very small percentage of annuitants have elected partial surrenders to date. An increase in CIGNA’s liabilities for variable annuity death benefits due to partial surrenders would depend on many factors, including financial market conditions prior to surrender and annuitant behavior.

The determination of reserves for variable annuity death benefits requires CIGNA to make critical accounting estimates, as discussed further on page 23. Management believes the current assumptions and other considerations used to estimate reserves for these liabilities are appropriate. However, if actual experience differs from the assumptions and other considerations (including lapse, partial surrender, mortality, interest rates and volatility) used in estimating these reserves, the resulting change could have a material adverse effect on CIGNA’s consolidated results of operations, and in certain situations, could have a material adverse effect on CIGNA’s financial condition.

As of December 31, 2002, the aggregate fair value of the underlying mutual fund investments was approximately $50 billion. The death benefit coverage in force as of that date (representing the amount that CIGNA would have to pay if all 1.5 million annuitants had died on that date) was approximately $23.4 billion. The death benefit coverage in force represents the excess of the guaranteed benefit amount over the fair value of the underlying mutual fund investments. The notional amount of the futures contract positions held by CIGNA at December 31, 2002, was $2.2 billion.

CIGNA has also written reinsurance contracts with issuers of variable annuity contracts that provide annuitants with certain guarantees related to minimum income benefits. When annuitants elect to receive these minimum income benefits, CIGNA may be required to make payments based on changes in underlying mutual fund values and interest rates. CIGNA has purchased reinsurance from third parties, which covers 80% of the exposures of these contracts. See page 38 for further information.

Unicover and other run-off reinsurance. The Run-off Reinsurance Operations participates in a workers’ compensation reinsurance pool, which ceased accepting new risks in early 1999. This pool was formerly managed by Unicover Managers, Inc. Certain disputes over reinsurance coverage for the pool were resolved by an arbitration ruling issued in October 2002, which was further clarified in January 2003.

The Run-off Reinsurance Operations include other workers’ compensation reinsurance contracts, as well as personal accident reinsurance contracts, including contracts assumed in the London market. CIGNA obtained reinsurance coverage in the London market for a significant portion of the claims under these contracts. Some of these London market retrocessionaires have disputed the validity of their contracts with CIGNA and arbitration over some of these disputes has commenced.

Based on the outcome of the Unicover arbitration in October 2002, as well as a review of other exposures for the run-off reinsurance operations, including an assessment of London market retrocessional disputes and workers’ compensation and personal accident reinsurance exposures, CIGNA recorded an after-tax charge of $317 million ($408 million pre-tax) in the third quarter of 2002.

The London market retrocessional disputes are not expected to be resolved for some time. In addition, unfavorable claims experience related to workers’ compensation and personal accident exposures is possible and could result in future losses, including losses attributable to the inability to recover amounts from retrocessionaires (either due to disputes with the retrocessionaires or their financial condition).

CIGNA’s reserves for amounts recoverable from retrocessionaires, as well as for reserves for liabilities associated with underlying reinsurance exposures assumed by CIGNA, are considered appropriate as of December 31, 2002, based on current information. However, it is possible that future developments regarding these matters could result in a material adverse effect on CIGNA’s consolidated results of operations, and, in certain situations, could have a material adverse effect on CIGNA’s financial condition.

See also Note 21(B) to the Financial Statements for more information.

2000 Reinsurance charges. During 2000, CIGNA recorded after-tax charges for the run-off reinsurance business totaling $127 million as follows:

• a charge of $84 million to strengthen reserves, following a review of reserve assumptions for specialty life reinsurance contracts that guarantee certain minimum death benefits based on unfavorable changes in variable annuity account values. These values are derived from underlying equity and bond mutual fund investments as more fully discussed above;

• a charge of $40 million to strengthen reserves for personal accident reinsurance contracts; and

• a charge of $3 million for restructuring costs (principally severance).

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OTHER OPERATIONS

(In millions)
Financial Summary	2002			2001		2000
Premiums and fees	$	116		$	143	$	146
Net investment income		409			450		459
Other revenues		177			190		179
Segment revenues		702			783		784
Benefits and expenses		591			674		649
Income before taxes		111			109		135
Income taxes		37			33		42
Operating income	$	74		$	76	$	93
Realized investment gains
(losses), net of taxes	$	(1	)	$	10	$	1

Other Operations consist of:

• deferred gains recognized from the 1998 sale of the individual life insurance and annuity business;

• corporate life insurance on which policy loans are outstanding (leveraged corporate life insurance);

• settlement annuity business; and

• certain investment management services initiatives.

Operating Income

Operating income in Other Operations decreased 3% in 2002 primarily due to the continued run-off of the leveraged corporate life insurance business and lower amortized gains on the sale of the individual life insurance business, partially offset by lower losses in investment management services.

The 18% decline in 2001 operating income primarily reflects lower earnings from leveraged corporate life insurance and higher losses from certain investment management services initiatives.

Premiums and Fees

Premiums and fees decreased 19% in 2002 and 2% in 2001 primarily due to lower premiums from leveraged corporate life insurance.

Other Revenues

Other revenues declined 7% in 2002 and increased 6% in 2001. The decline in 2002 primarily reflects lower amortized gains from the sale of the individual life insurance and annuity business. The increase in 2001 primarily reflects higher investment advisory fees.

Other Matters

Tax benefits for corporate life insurance. In 1996, Congress passed legislation implementing a three-year phase-out period for tax deductibility of policy loan interest for most leveraged corporate life insurance products. In 2001, the Internal Revenue Service (IRS) implemented an initiative for leveraged corporate life insurance plans purchased after June 20, 1986, that permits policyholders to settle tax disputes related to these plans. Management expects that some customers will accept the IRS settlement offer and surrender their policies in 2003. As a result, management expects revenues and operating income associated with these products to decline. In 2002, revenues of $221 million and operating income of $32 million were from products affected by this legislation.

CORPORATE

(In millions)
Financial Summary	2002			2001			2000
Operating loss	$	(87	)	$	(96	)	$	(58	)

Corporate reflects amounts not allocated to segments, such as interest expense on corporate debt, net investment income on unallocated investments, intersegment eliminations and certain corporate overhead expenses. The lower operating loss in 2002 primarily reflects a decline in unallocated corporate overhead expenses.

The increased operating loss in 2001 primarily reflects:

• lower net investment income on unallocated corporate investments, primarily due to lower interest rates and higher share repurchase activity;

• higher unallocated corporate overhead expenses; and

• higher interest expenses in 2001.

DISCONTINUED OPERATIONS

(In millions)
Financial Summary	2002			2001		2000
Revenues	$	567		$	508	$	468
Income before taxes	$	1		$	28	$	10
Income taxes		2			10		4
Income (loss) from
discontinued operations	$	(1	)	$	18	$	6

In January 2003, CIGNA sold the operations of Lovelace for approximately $210 million and will recognize an after-tax gain of approximately $30 million in the first quarter of 2003. In the fourth quarter of 2002, CIGNA began reporting this business as discontinued operations and prior year financial information has been reclassified.

During 2002, CIGNA increased reserves for a Medicare cost reporting matter associated with Lovelace (see page 26) by $9 million after-tax ($14 million pre-tax). In the fourth quarter of 2002, Lovelace entered into a settlement agreement with the federal government related to this matter. This charge is included in results of discontinued operations.

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LIQUIDITY AND CAPITAL RESOURCES

(In millions)
Financial Summary	2002		2001		2000
Short-term investments	$	86	$	137	$	166
Cash and cash equivalents	$	1,575	$	1,918	$	2,179
Short-term debt	$	130	$	49	$	145
Long-term debt	$	1,500	$	1,626	$	1,162
Shareholders' equity	$	3,867	$	5,055	$	5,413

Liquidity

CIGNA normally meets its operating requirements by:

• maintaining appropriate levels of liquidity in its investment portfolio;

• using cash flows from operating activities; and

• matching investment maturities to the estimated duration of the related insurance and contractholder liabilities.

CIGNA’s operations have liquidity requirements that vary among the principal product lines.

Life insurance and pension plan reserves are primarily longer-term liabilities. Liquidity requirements are usually stable and predictable, and are supported primarily by medium-term, fixed-income investments.

Accident and health reserves, including reserves for long-term disability insurance, consist of both short-term and long-term liabilities. The settlement of reported claims is generally stable and predictable, but usually shorter-term, requiring greater liquidity.

CIGNA’s insurance and HMO subsidiaries are subject to regulatory restrictions that limit the amount of dividends or other distributions (such as loans or cash advances) these subsidiaries may provide to their shareholders without prior approval of regulatory authorities. These restrictions may limit the use of operating cash flows of the insurance and HMO subsidiaries for CIGNA’s general corporate purposes.

Cash flows from continuing operations for the year ended December 31 were as follows:

(In millions)	2002			2001			2000
Operating activities	$	1,378		$	1,063		$	1,671
Investing activities	$	(1,486	)	$	(2,011	)	$	(902	)
Financing activities	$	(235	)	$	671		$	(773	)

Cash and cash equivalents decreased $343 million in 2002 and $261 million in 2001.

Cash flows from operating activities consist of operating income adjusted to reflect the timing of cash receipts and disbursements for premiums and fees, investment income, taxes, and benefits, losses and expenses.

Amounts shown for cash flows from operating, investing and financing activities are discussed below:

2002:

• The increase in cash flows from operating activities in 2002 primarily reflects higher cash revenues of approximately $1 billion (due to price increases and growth in the Employee Health Care, Life and Disability Benefits segment). This increase was partially offset by:

— Higher cash expenses of approximately $470 million (primarily in the Employee Health Care, Life and Disability Benefits segment) reflecting customer service and technology initiatives, growth in the specialty lines of business as well as 2002 cash spending of approximately $40 million for the 2001 restructuring charge;

— Higher tax payments of approximately $100 million, primarily due to taxes paid in 2002 for the 2001 gain on sales of interests in the Japanese life insurance operation;

— Higher paid claims of approximately $90 million due to medical cost inflation, partially offset by membership declines, the absence of Medicare claim payments that had been made in 2001 due to the exit of certain Medicare markets and the timing of payment of claims; and

— Lower collections of net investment income of approximately $30 million due to declining yields and the continued run-off of the leveraged corporate life insurance business.

• Cash used in investing activities consisted of net purchases of investments of approximately $1.1 billion and net purchases of property and equipment of $303 million.

• Cash used in financing activities consisted primarily of payments of dividends on and repurchases of common stock ($540 million), partially offset by net deposits to contractholder deposit funds ($282 million).

2001:

• The decrease in cash flows from operating activities in 2001 primarily reflects the absence of operating cash flows resulting from the deconsolidation of the Japanese life insurance operation in 2001 (explained on page 31 and in Note 4 to the Financial Statements) and, to a lesser extent, higher claims payments during 2001 related to the run-off reinsurance operations and Medicare market exits.

• Cash used in investing activities increased partially as a result of a decline in cash of $327 million resulting from the deconsolidation of the Japanese life insurance operation as well as higher net investment purchases. These increases were partially offset by $350 million in proceeds from the sales of interests in the Japanese life insurance operation.

35

• Cash provided by financing activities consisted of net deposits and interest credited to contractholder deposits ($1.6 billion) and net issuance of debt ($362 million), partially offset by payment of dividends on and repurchase of CIGNA’s common stock ($1.3 billion).

Capital Resources

CIGNA’s capital resources (primarily retained earnings and the proceeds from the issuance of long-term debt and equity securities) provide protection for policyholders, furnish the financial strength to support the business of underwriting insurance risks and facilitate continued business growth. Over the long term, CIGNA’s priorities for use of capital are internal growth, acquisitions and share repurchase. Given the capital needs of CIGNA’s principal subsidiary (Connecticut General Life Insurance Company, or CG Life) primarily resulting from the charges for the run-off reinsurance operations (as discussed on pages 31 through 33), CIGNA intends to retain capital and has suspended share repurchase.

Senior management and the Board of Directors, guided by regulatory requirements and rating agency capital guidelines, determine the amount of capital resources that CIGNA maintains. Management allocates resources to new long-term business commitments when returns, considering the risks, look promising and when the resources available to support existing business are adequate.

CIGNA issued the following debt securities in 2001:

• $250 million of 7% notes due in 2011, issued in January; and

• $250 million of 6.375% notes due in 2011, issued in October.

CIGNA has $500 million remaining under an effective shelf registration statement filed with the Securities and Exchange Commission, which may be issued as debt securities, equity securities or both. Management and the Board of Directors will consider market conditions and internal capital requirements when deciding whether CIGNA should issue new securities.

In March 2002, CIGNA entered into a syndicated bank letter of credit agreement of $650 million in support of an internal reinsurance arrangement associated with obligations of a subsidiary. This reinsurance arrangement was terminated as of July 1, 2002, and no letters of credit are currently issued under this agreement.

As of December 31, 2002, CIGNA had available $215 million in committed lines of credit. These lines are provided by U.S. banks and typically have terms ranging from one to three years. Approximately $70 million of CIGNA’s available lines of credit will expire within the next twelve months.

CIGNA’s long-term debt outstanding as of December 31, 2002, was $1.5 billion compared to $1.6 billion as of December 31, 2001. CIGNA’s short-term debt (primarily the current portion of long-term debt) was $130 million as of December 31, 2002, an increase of $81 million from December 31, 2001.

Liquidity and Capital Resources Outlook

The availability of resources for general corporate purposes (i.e., cash held at the parent/holding company level) is dependent on dividends from CIGNA’s subsidiaries, most of which are subject to regulatory restrictions and rating agency capital guidelines. CIGNA expects, based on current projections for cash activity (including projections for dividends from subsidiaries), to have sufficient resources to:

• provide for the capital requirements of its subsidiaries;

• meet debt service requirements and pay dividends to CIGNA shareholders at the current dividend rate; and

• satisfy pension plan funding requirements.

However, the demand for funds could exceed available cash if:

• management uses cash for investment opportunities;

• a substantial insurance or contractholder liability becomes due before related investment assets mature; or

• regulatory restrictions prevent the insurance and HMO subsidiaries from distributing cash.

In those cases, CIGNA has the flexibility to satisfy liquidity needs through short-term borrowings. As stated above, CIGNA had available $215 million in committed bank lines of credit as of December 31, 2002. CIGNA has no current plans to issue additional debt securities in 2003.

The maturities of CIGNA’s contractual cash obligations for debt and lease obligations as of December 31, 2002, are as follows:

(In millions)	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Short-term debt	$	130	$	130	$	--	$	--	$	--
Long-term debt		1,500		--		--		500		1,000
Operating leases		616		141		246		127		102
Total	$	2,246	$	271	$	246	$	627	$	1,102

As of December 31, 2002, CIGNA also had commitments to purchase the following investments:

Fixed maturities	$	80 million
Commercial mortgage loans	$	154 million
Real estate joint ventures and security partnerships   (other long-term investments)	$	123 million

CIGNA expects to disburse most of these committed amounts in 2003. CIGNA also expects to provide approximately $75 million of funding to pension plan assets in 2003. See Note 14 to the Financial Statements for further information.

36

Ratings

CIGNA and certain of its insurance subsidiaries are rated by nationally recognized rating agencies. The significance of individual ratings varies from agency to agency. However, companies assigned ratings at the top end of the range have, in the opinion of the rating agency, the strongest capacity for repayment of debt or payment of claims, while companies at the bottom end of the range have the weakest capability. Ratings are always subject to change and there can be no assurance that CIGNA’s current ratings will continue for any given period of time.

CIGNA expects the downgrades during 2002 in the financial strength rating of Connecticut General Life Insurance Company to have a moderately adverse effect on the retirement business. Any additional change in rating could have an impact on CIGNA’s results, particularly in the retirement business. A downgrade of CIGNA’s debt ratings, depending on the extent, would increase the cost to borrow funds.

For additional information and a listing of CIGNA’s current ratings, refer to the Ratings section in CIGNA’s Form 10-K.

Financial Guarantees

CIGNA, through its subsidiaries, is contingently liable for various financial guarantees provided in the ordinary course of business.

Separate account assets are contractholder funds maintained in accounts with specific investment objectives. CIGNA records separate account liabilities equal to separate account assets. In certain cases, CIGNA guarantees a minimum level of benefits for retirement and insurance contracts written in separate accounts. CIGNA establishes an additional liability if management believes that CIGNA will be required to make a payment under these guarantees, which include the following:

• CIGNA guarantees that separate account assets will be sufficient to pay certain retiree or life benefits. The sponsoring employers are primarily responsible for ensuring that assets are sufficient to pay these benefits and are required to maintain assets that exceed a certain percentage of benefit obligations. This percentage varies depending on the asset class within a sponsoring employer’s portfolio (for example, a bond fund would require a lower percentage than a riskier equity fund) and thus will vary as the composition of the portfolio changes. If employers do not maintain the required levels of separate account assets, CIGNA has the right to redirect the management of the related assets to provide for benefit payments. As of December 31, 2002, employers were required to maintain assets that exceed 102% to 128% of benefit obligations. Benefit obligations under these arrangements were $3.3 billion as of December 31, 2002, and $2.4 billion as of December 31, 2001. There were no additional liabilities required for these guarantees as of December 31, 2002 or 2001.

• For certain employer-sponsored savings and retirement plans, CIGNA guarantees that participants will receive the value of their accounts at the time of withdrawal. These guarantees could require payment by CIGNA in the event that a significant number of plan participants withdraw their accounts when the market value of the related separate account assets is less than the plan participant account values at the time of withdrawal. Participant account values under these arrangements are invested primarily in fixed income investments and were $1.7 billion as of December 31, 2002, and $1.8 billion as of December 31, 2001. There were no additional liabilities required for these guarantees as of December 31, 2002 or 2001.

• CIGNA guarantees a minimum level of earnings (based on investment, mortality and retirement experience) for a certain group annuity contract. If the actual investment return is less than the minimum guaranteed level, CIGNA is required to fund the difference. The guaranteed benefit obligation was $313 million as of December 31, 2002, and $334 million as of December 31, 2001. CIGNA had additional liabilities for this guarantee of $15 million as of December 31, 2002, and $14 million as of December 31, 2001.

CIGNA does not expect that these guarantees will have a material adverse effect on CIGNA’s consolidated results of operations, liquidity or financial condition.

As of December 31, 2002 and 2001, CIGNA guaranteed $106 million of construction loans related to investments in certain real estate joint ventures. These loans are secured by the joint ventures’ real estate properties with fair value in excess of the loan amounts. The loans mature at various dates from 2003 to 2007, including extension options. CIGNA would be required to repay the construction loans if permanent financing could not be obtained. CIGNA has recourse to other owners for 3% of any amounts paid under these guarantees. There were no liabilities required for these guarantees as of December 31, 2002 or 2001.

As of December 31, 2002 and 2001, CIGNA guaranteed $42 million of principal for industrial revenue bonds that are payable in 2007 and also guaranteed $8 million of aggregate interest payable periodically up to maturity. These bonds are secured by mortgages on properties and other assets held by real estate partnerships. An event of default under these bonds will not cause the principal or interest payments to be due immediately, but instead CIGNA would be required to make principal or interest payments under the original terms of the bonds. CIGNA has recourse to partners for 43% of any amounts paid under these guarantees. There were no liabilities required for these guarantees as of December 31, 2002 or 2001.

At December 31, 2002, CIGNA guaranteed a shortfall of up to $49 million in the market value of leased equipment at the end of the lease. CIGNA had such guarantees for leased equipment of $21 million at December 31, 2001. Guarantees of $21 million expire in 2006 and $28 million expire in 2012.

37

Specialty Life Reinsurance Contracts. The Run-off Reinsurance Operations include certain specialty life reinsurance contracts that guarantee minimum death benefits based on unfavorable changes in variable annuity account values. In 2002, CIGNA recognized an after-tax charge of $720 million ($1.1 billion pre-tax) to strengthen reserves related to these contracts and the adoption of a program to substantially reduce equity market risks related to these contracts. See Note 3 to the Financial Statements for further information.

CIGNA has also written reinsurance contracts with issuers of variable annuity contracts that provide annuitants with certain guarantees related to minimum income benefits. When annuitants elect to receive these minimum income benefits, CIGNA may be required to make payments based on changes in underlying mutual fund values and interest rates. CIGNA has purchased reinsurance from third parties, which covers 80% of the exposures of these contracts. CIGNA estimates the fair value of the assets and liabilities associated with these contracts using assumptions as to equity market returns, volatility of the underlying equity and bond mutual fund investments, interest rates, mortality, annuity election rates and policy surrenders.

In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which requires disclosure of maximum potential undiscounted future payments for guarantees, even if the likelihood of such payment is remote. In accordance with this requirement, the maximum potential undiscounted payments that CIGNA would make for guarantees related to minimum income benefits under the following hypothetical assumptions, which CIGNA believes unlikely to occur:

• no annuitants surrendered their accounts, and

• all annuitants lived to elect their benefit, and

• all annuitants elected to receive their benefit on the first available date (beginning in 2004 through 2014), and

• all underlying mutual fund investment values remained at the December 31, 2002, value of $2.7 billion, with no future returns,

would aggregate $2.7 billion, gross of reinsurance. CIGNA has reinsurance for 80% of this amount. CIGNA expects the amount of actual payments to be significantly less than this hypothetical undiscounted aggregate amount.

As of December 31, 2002, CIGNA had liabilities of $95 million related to these contracts and amounts recoverable from reinsurers of $76 million. CIGNA has an additional liability of $44 million associated with the cost of reinsurance. Management believes the current assumptions and other considerations used to estimate reserves for these liabilities are appropriate.  See Note 7(G) to the Financial Statements for further information.

Share Repurchase

CIGNA’s Board of Directors has authorized a stock repurchase plan. Decisions to repurchase shares depend on market conditions and available alternative uses of capital. Share repurchase activity for the year ended December 31 was as follows:

(In millions, except per share amounts)	2002		2001		2000
Shares repurchased		3.5		12.0		19.2
Cost of shares repurchased	$	343	$	1,139	$	1,681
Average price per share	$	98.33	$	94.66	$	87.32

As a result of the increased capital requirements resulting primarily from reserve increases for the run-off reinsurance operations (see page 36), CIGNA has suspended share repurchase and has not repurchased any shares of its common stock since July 18, 2002. The total remaining share repurchase authorization as of February 27, 2003, was $572 million.

INVESTMENT ASSETS

Information regarding investment assets held by CIGNA as of December 31 is presented below. CIGNA’s investment assets do not include separate account assets. Additional information regarding CIGNA’s investment assets and related accounting policies is included in Notes 2, 7, 8 and 9 to the Financial Statements and in CIGNA’s Form 10-K.

(In millions)
Financial Summary	2002		2001
Fixed maturities	$	27,803	$	23,401
Equity securities		295		404
Mortgage loans		8,729		9,920
Policy loans		2,405		2,774
Real estate		253		432
Other long-term investments		791		1,193
Short-term investments		86		137
Total investment assets	$	40,362	$	38,261

A significant portion of CIGNA’s investment assets is attributable to experience-rated policyholder contracts associated with the retirement business. The following table shows, as of December 31, the percentage of certain categories of investment assets that are held under these policyholder contracts:

	2002	2001
Fixed maturities	48%	45%
Mortgage loans	56%	56%
Real estate	54%	55%
Other long-term investments	46%	53%

Under the experience-rating process, net investment income and gains and losses on assets related to policyholder contracts generally accrue to the policyholders. Consequently, write-downs, changes in valuation reserves and non-accruals on investments attributable to policyholder contracts do not affect CIGNA’s net income except under unusual circumstances.

38

Fixed Maturities

Investments in fixed maturities (bonds) include publicly traded and privately placed debt securities, mortgage and other asset-backed securities and redeemable preferred stocks.

The fair value of investments in fixed maturities as of December 31 was as follows:

(In millions)	2002		2001
Federal government and agency	$	1,197	$	499
State and local government		1,761		1,596
Foreign government		825		610
Corporate		17,796		15,211
Federal agency mortgage-backed		1,669		627
Other mortgage-backed		2,265		2,344
Other asset-backed		2,290		2,514
Total	$	27,803	$	23,401

Additional information regarding fixed maturities follows.

Quality ratings. As of December 31, 2002, $26.4 billion, or 95%, of the fixed maturities in CIGNA’s investment portfolio were investment grade (Baa and above, or equivalent), and the remaining $1.4 billion were below investment grade. Most of the bonds that are below investment grade are rated at the higher end of the non-investment grade spectrum. Approximately 33% of CIGNA’s below investment grade portfolio is attributable to policyholder contracts.

Private placement investments are generally less marketable than public bonds, but yields on these investments tend to be higher than yields on publicly offered debt with comparable credit risk. The fair value of private placement investments was $11.0 billion as of December 31, 2002 and 2001. CIGNA has several controls on its participation in private placement investments. In particular, CIGNA performs a credit analysis of each issuer, diversifies investments by industry and issuer and requires financial and other covenants that allow CIGNA to monitor issuers for deteriorating financial strength so CIGNA can take remedial actions, if warranted.

Because of the higher yields and the inherent risk associated with privately placed investments and below investment grade securities, gains or losses from such investments could significantly affect future results of operations. However, management does not expect such gains or losses to be material to CIGNA’s liquidity or financial condition.

Asset-backed securities are debt obligations secured by pools of federal agency mortgage-backed securities, other mortgage-backed securities, corporate debt obligations (collateralized debt obligations) or consumer loans.

CIGNA’s investment in collateralized debt obligations, which are secured by pools of corporate debt obligations, was $228 million at December 31, 2002, and $321 million at December 31, 2001, excluding policyholder share. CIGNA recorded after-tax losses of $16 million ($25 million pre-tax) in 2002 compared to $84 million ($129 million pre-tax) in 2001 reflecting a lower level of defaults in the underlying pools of corporate debt obligations.

CIGNA’s investment in asset-backed securities includes collateralized mortgage obligations (CMOs) of $28 million at December 31, 2002, and $64 million at December 31, 2001, excluding policyholder share. These CMO investments were carried at fair value, with an amortized cost of $29 million at December 31, 2002, and $62 million at December 31, 2001.

Certain of the CMOs that CIGNA holds are backed by Aaa/AAA-rated federal agencies. Most of the remaining CMOs have high quality ratings because of credit enhancements provided by subordinated securities, or mortgage insurance from Aaa/AAA-rated insurance companies.

CIGNA’s CMO holdings are concentrated in securities with limited prepayment, extension and default risk.

Review of Declines in Fair Value

Management estimates the amount of “other than temporary” impairment when a decline in the value of fixed maturities or equity securities is expected to persist. Management reviews fixed maturities and equity securities for impairment based on criteria that include for any decline in fair value from cost, the length of time of that decline, the financial health and specific near term prospects of the issuer and changes in the regulatory, economic or general market environment of the issuer’s industry or geographic region. As of December 31, 2002, fixed maturities and equity securities (excluding policyholder share) with a decline in fair value from cost, including the length of time of such decline, were as follows:

(In millions)	Fair Value		Amortized Cost		Unrealized Loss
Fixed maturities
One year or less:
Investment grade	$	1,470	$	1,486	$	16
Below investment grade	$	224	$	256	$	32
More than one year:
Investment grade	$	381	$	415	$	34
Below investment grade	$	337	$	376	$	39
Equity securities
One year or less	$	157	$	179	$	22
More than one year	$	20	$	28	$	8

Mortgage Loans

CIGNA’s mortgage loans are diversified by property type, location and borrower to reduce exposure to potential losses. CIGNA routinely monitors and evaluates the status of its mortgage loans by reviewing loan and property-related information, including cash flows, expiring leases, financial health of the borrower and major tenants, loan payment history, occupancy and room rates for hotels and, for commercial properties, significant new competition. CIGNA evaluates this information in light of current economic conditions as well as geographic and property type considerations.

39

Problem and Potential Problem Bonds and Mortgage Loans

“Problem” bonds and mortgage loans are delinquent or have been restructured as to terms (interest rate or maturity date). “Potential problem” bonds and mortgage loans are fully current, but management believes they have certain characteristics that increase the likelihood that they will become “problems.” CIGNA also considers mortgage loans to be potential problems if the borrower has requested restructuring, or principal or interest payments are past due by more than 30 but fewer than 60 days.

CIGNA recognizes interest income on “problem” bonds and mortgage loans only when payment is actually received because of the risk profile of the underlying investment.

The following table shows problem and potential problem bonds and mortgage loans, net of valuation reserves and write-downs, as of December 31, including amounts attributable to policyholder contracts:

(In millions)	2002		2001
Problem bonds	$	182	$	224
Potential problem bonds	$	243	$	137
Problem mortgage loans	$	48	$	111
Potential problem mortgage loans	$	191	$	78

The decrease in problem bonds and problem mortgage loans since December 31, 2001, primarily reflects sales and payoff activity. The increase in potential problem bonds and potential problem mortgage loans since December 31, 2001, is primarily due to continued weak economic conditions.

Real Estate

Investment real estate includes both real estate held and used and real estate held for sale. Most of the real estate held for sale in 2002 and 2001 was office buildings and retail facilities that were acquired as a result of foreclosure of mortgage loans. As of December 31, investment real estate (including amounts attributable to policyholder contracts) and related cumulative write-downs and valuation reserves were as follows:

(In millions)	2002		2001
Real estate held for sale	$	47	$	330
Less cumulative write-downs		8		37
Less valuation reserves		21		45
		18		248
Real estate held and used		303		227
Less cumulative write-downs		68		43
		235		184
Investment real estate	$	253	$	432

CIGNA reclassified $119 million of real estate held for sale to real estate held and used as of January 1, 2002, when CIGNA adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” See Note 2 to the Financial Statements for further information.

At December 31, 2002, 45% of the carrying value of the properties acquired through foreclosure was attributable to policyholder contracts, compared with 54% at December 31, 2001.

Summary

The effect of investment asset write-downs and changes in valuation reserves on CIGNA’s net income and on amounts attributable to policyholder contracts was as follows:

(In millions)	2002		2001		2000
CIGNA	$	150	$	139	$	46
Policyholder contracts	$	199	$	78	$	43

CIGNA’s portion of these losses is a component of realized investment results, which are discussed on page 19.

The effect of non-accruals (“problem” investments) resulted in lower net income in 2002 ($14 million after-tax) and in 2001 ($12 million after-tax) than would have been recorded if interest on non-accrual investments had been recognized in accordance with the original terms of these investments. The effect of non-accruals was not material to CIGNA’s consolidated results of operations in 2000.

The weakness in certain sectors of the economy is likely to cause additional investment losses. These investment losses could materially affect future results of operations, although CIGNA does not currently expect them to have a material effect on CIGNA’s liquidity or financial condition, or to result in a significant decline in the aggregate carrying value of its assets.

MARKET RISK OF FINANCIAL INSTRUMENTS

CIGNA’s Market Risks

CIGNA’s assets and liabilities include financial instruments subject to the risk of potential losses from adverse changes in market rates and prices. CIGNA’s primary market risk exposures are:

• Interest-rate risk on fixed-rate, domestic, medium-term instruments. Changes in market interest rates affect the value of instruments that promise a fixed return.

• Foreign currency exchange rate risk of the U.S. dollar to the British pound, South Korean won, Taiwan dollar, Chilean peso, Hong Kong dollar, Japanese yen, Canadian dollar, and Euro. An unfavorable change in exchange rates reduces the carrying value of net assets denominated in foreign currencies.

• Equity price risk for stocks and for specialty life reinsurance contracts that guarantee death or minimum income benefits resulting from unfavorable changes in variable annuity account values based on underlying mutual fund investments. CIGNA’s investment in domestic equity securities (which are primarily managed to mirror the S&P 500) was $261 million at December 31, 2002, and $366 million at December 31, 2001. CIGNA held $34 million in international equities at December 31, 2002, and $38 million at December 31, 2001. Substantially all of CIGNA’s international equities were issued by entities based in developed countries.

40

CIGNA’s Management of Market Risks

CIGNA predominantly relies on three techniques to manage its exposure to market risk:

• Investment/liability matching. CIGNA generally selects investment assets with characteristics (such as duration, yield, currency and liquidity) that correspond to the underlying characteristics of its related insurance and contractholder liabilities so that CIGNA can match the investments to its obligations. Shorter-term investments support generally shorter-term life and health liabilities. Medium-term, fixed-rate investments support interest-sensitive, experience-rated and health liabilities. Longer-term investments generally support longer-term, fully guaranteed products like annuities and longer-term life and health (principally long-term disability) liabilities.

• Use of local currencies for foreign operations. CIGNA generally conducts its international business through foreign operating entities that maintain assets and liabilities in local currencies. This substantially limits exchange rate risk to net assets denominated in foreign currencies.

• Use of derivatives. CIGNA generally uses derivative financial instruments to minimize certain market risks. In addition, CIGNA has written reinsurance contracts with issuers of variable annuity contracts that provide annuitants with certain guarantees related to minimum income benefits.

See Notes 2(C) and 7(G) to the Financial Statements for additional information about financial instruments, including derivative financial instruments.

Effect of Market Fluctuations on CIGNA

The examples shown in the table that follows illustrate the effect of hypothetical changes in market rates or prices on the fair value of certain financial instruments. Actual results could differ materially because the examples were developed using estimates and assumptions. Certain financial instruments, such as separate account assets and liabilities, are excluded from these hypothetical calculations because gains and losses in separate accounts generally accrue to policyholders. Insurance contract liabilities (48% of CIGNA’s non-separate account liabilities at December 31, 2002 and 2001) and reinsurance recoverables on unpaid losses (11% of CIGNA’s non-separate account assets at December 31, 2002 and 12% at December 31, 2001) are also excluded. In addition, the effect of a hypothetical change in equity indices on fair values of futures contracts used in a program for certain specialty life reinsurance contracts is excluded from this table and discussed separately below.

Subject to these exclusions, the effects of hypothetical changes in market rates or prices on the fair values of certain of CIGNA’s financial instruments would have been as follows as of December 31:

Market scenario for certain noninsurance financial instruments	Loss in fair value
(In millions)		2002		2001
100 basis point increase in interest rates	$	1,110	$	790
10% strengthening in U.S. dollar to foreign currencies	$	90	$	80
10% decrease in market prices for equity exposures	$	50	$	70

The effect of a hypothetical increase in interest rates on the fair values of certain of CIGNA’s financial instruments increased in 2002 due to increased fixed maturities to support insurance liabilities. The effect of a hypothetical increase in interest rates was determined by estimating the present value of future cash flows using various models, primarily duration modeling. The effect of a hypothetical strengthening of the U.S. dollar relative to the foreign currencies held by CIGNA was estimated to be 10% of the U.S. dollar equivalent fair value. The effect of a hypothetical decrease in the market prices of equity securities was estimated to be 10% of their fair value.

As discussed on pages 32 and 33, CIGNA began using futures contracts in 2002 as part of a program to substantially reduce the effect of equity market changes on certain specialty life reinsurance contracts that guarantee minimum death benefits based on unfavorable changes in variable annuity account values. The effect of a hypothetical 10% increase in the S&P 500, Russell 2000 and NASDAQ equity indices would have been a decrease of approximately $210 million in the fair value of the futures contracts outstanding under this program as of December 31, 2002. A corresponding decrease in liabilities for these specialty life reinsurance contracts would result from the hypothetical 10% increase in the S&P 500, Russell 2000 and NASDAQ equity indices. See Note 3 to the Financial Statements for further discussion of this program and related specialty life reinsurance contracts.

See also page 20 for a discussion of the effects of recent stock market declines on CIGNA.

41

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

CIGNA and its representatives may from time to time make written and oral forward-looking statements, including statements contained in press releases, in CIGNA’s filings with the Securities and Exchange Commission, in its reports to shareholders and in meetings with analysts and investors. Forward-looking statements may contain information about financial prospects, economic conditions, trends and other uncertainties. CIGNA cautions that actual results could differ materially from those that management expects, depending on the outcome of certain factors. Some factors that could cause actual results to differ materially from the forward-looking statements include:

1. increases in medical costs that are higher than anticipated in establishing premium rates in CIGNA's health care operations, including increased use and costs of medical services;

2. increased medical, administrative, technology or other costs resulting from legislative and regulatory challenges to, and new regulatory requirements imposed on, CIGNA’s health care business (see Health care regulation on page 25 for more information);

3. difficulties in implementing the realignment of health care operations initiated in the second half of 2002 and achievement of the intended customer service improvements, operational efficiencies and cost savings;                

4. the risks associated with pending and potential state and federal health care class action lawsuits, purported securities class action lawsuits, disputes regarding reinsurance arrangements, other litigation challenging CIGNA’s businesses and the outcome of pending government proceedings;

5. heightened competition, particularly price competition, which could reduce product margins and constrain growth in CIGNA's businesses;

6. significant reductions in customer retention;

7. significant changes in interest rates;

8. downgrades in the financial strength ratings of CIGNA's insurance subsidiaries, which could, among other things, adversely affect new sales and retention of current business, particularly the retirement business;                

9. inability of the program adopted by CIGNA to substantially reduce equity market risks for reinsurance contracts that guarantee minimum death benefits under certain variable annuities (including possible market difficulties in entering into appropriate futures contracts and in matching such contracts to the underlying equity risk);

10. adjustments to the reserve assumptions and other considerations (including lapse, partial surrender, mortality, interest rates, and volatility) used in estimating CIGNA’s liabilities for reinsurance contracts that guarantee minimum death benefits under certain variable annuities;

11. adjustments to the reserve assumptions and other considerations used in estimating CIGNA's liabilities for reinsurance contracts that guarantee minimum income benefits under certain variable annuities;                

12. significant stock market declines, which could, among other things, reduce results in CIGNA’s retirement business and result in increased pension expenses in CIGNA’s pension plan in future periods and the recognition of additional pension obligations;

13. unfavorable claims experience related to workers’ compensation and personal accident exposures of the run-off reinsurance business, including losses attributable to the inability to recover claims from retrocessionaires;

14. significant deterioration in economic conditions, which could have an adverse effect on CIGNA's operations and investments; and

15. changes in federal income tax laws.

This list of important factors is not intended to be exhaustive. There may be other risk factors that would preclude CIGNA from realizing the forward-looking statements. While CIGNA may periodically update this discussion of risk factors, CIGNA does not undertake to update any forward-looking statement that may be made by or on behalf of CIGNA prior to its next required filing with the Securities and Exchange Commission.

42

Consolidated Statements of Income

(In millions, except per share amounts)
For the years ended December 31,		2002			2001			2000
Revenues
Premiums and fees	$	15,737		$	14,860		$	15,862
Net investment income		2,716			2,842			2,940
Other revenues		1,133			1,080			717
Realized investment gains (losses)		(238	)		(175	)		7
Total revenues		19,348			18,607			19,526
Benefits, Losses and Expenses
Benefits, losses and settlement expenses		14,314			11,976			13,059
Policy acquisition expenses		246			237			268
Other operating expenses		5,357			4,925			4,712
Total benefits, losses and expenses		19,917			17,138			18,039
Income (Loss) from Continuing Operations
before Income Taxes (Benefits)		(569	)		1,469			1,487
Income taxes (benefits):
Current		(131	)		293			575
Deferred		(41	)		205			(69	)
Total taxes (benefits)		(172	)		498			506
Income (Loss) from Continuing Operations		(397	)		971			981
Income (Loss) from Discontinued Operations		(1	)		18			6
Net Income (Loss)	$	(398	)	$	989		$	987
Net Income (Loss) Excluding Goodwill Amortization
in 2001 and 2000 (Note 2)	$	(398	)	$	1,037		$	1,035
Basic Earnings (Loss) Per Share
Income (loss) from continuing operations	$	(2.83	)	$	6.57		$	6.14
Income (loss) from discontinued operations		--			0.12			0.04
Net income (loss)	$	(2.83	)	$	6.69		$	6.18
Net income (loss) excluding goodwill amortization
in 2001 and 2000 (Note 2)	$	(2.83	)	$	7.01		$	6.48
Diluted Earnings (Loss) Per Share
Income (loss) from continuing operations	$	(2.83	)	$	6.47		$	6.04
Income (loss) from discontinued operations		--			0.12			0.04
Net income (loss)	$	(2.83	)	$	6.59		$	6.08
Net income (loss) excluding goodwill amortization
in 2001 and 2000 (Note 2)	$	(2.83	)	$	6.91		$	6.38

The accompanying Notes to the Financial Statements are an integral part of these statements.

43

Consolidated Balance Sheets

(In millions, except per share amounts)
As of December 31,					2002						2001
Assets
Investments:
Fixed maturities, at fair value (amortized cost, $25,948; $22,672)				$	27,803					$	23,401
Equity securities, at fair value (cost, $239; $310)					295						404
Mortgage loans					8,729						9,920
Policy loans					2,405						2,774
Real estate					253						432
Other long-term investments					791						1,193
Short-term investments					86						137
Total investments					40,362						38,261
Cash and cash equivalents					1,575						1,918
Accrued investment income					504						522
Premiums, accounts and notes receivable					3,206						2,798
Reinsurance recoverables					6,775						6,983
Deferred policy acquisition costs					494						448
Property and equipment					1,078						986
Deferred income taxes					1,257						1,033
Goodwill					1,620						1,632
Other assets, including other intangibles					624						566
Separate account assets					31,255						36,263
Assets of discontinued operations					200						179
Total assets				$	88,950					$	91,589
Liabilities
Contractholder deposit funds				$	29,374					$	28,961
Unpaid claims and claim expenses					4,535						3,950
Future policy benefits					11,848						10,523
Unearned premiums					243						237
Total insurance and contractholder liabilities					46,000						43,671
Accounts payable, accrued expenses and other liabilities					6,123						4,863
Short-term debt					130						49
Long-term debt					1,500						1,626
Separate account liabilities					31,255						36,263
Liabilities of discontinued operations					75						62
Total liabilities					85,083						86,534
Contingencies -- Note 21
Shareholders' Equity
Common stock (shares issued, 273; 271)					68						68
Additional paid-in capital					3,212						3,093
Net unrealized appreciation, fixed maturities	$	512					$	189
Net unrealized appreciation, equity securities		26						50
Net unrealized appreciation, derivatives		6						10
Net translation of foreign currencies		(32	)					(26	)
Minimum pension liability adjustment		(714	)					(76	)
Accumulated other comprehensive income (loss)					(202	)					147
Retained earnings					9,299						9,882
Less treasury stock, at cost					(8,510	)					(8,135	)
Total shareholders' equity					3,867						5,055
Total liabilities and shareholders' equity				$	88,950					$	91,589
Shareholders' Equity Per Share				$	27.75					$	35.71

The accompanying Notes to the Financial Statements are an integral part of these statements.

44

Consolidated Statements of Comprehensive Income and Changes in Shareholders’ Equity

(In millions, except per share amounts)
For the years ended December 31,	2002						2001						2000
	Compre- hensive Income			Share- holders' Equity			Compre- hensive Income			Share- holders' Equity			Compre- hensive Income			Share- holders' Equity
Common Stock, beginning of year				$	68					$	67					$	67
Issuance of common stock for employee
benefit plans					--						1						--
Common Stock, end of year					68						68						67
Additional Paid-In Capital, beginning
of year					3,093						2,966						2,825
Issuance of common stock for employee
benefit plans					119						127						141
Additional Paid-In Capital, end of year					3,212						3,093						2,966
Accumulated Other Comprehensive
Income, beginning of year					147						221						166
Net unrealized appreciation, fixed maturities	$	323			323		$	26			26		$	199			199
Net unrealized depreciation, equity securities		(24	)		(24	)		(80	)		(80	)		(54	)		(54	)
Net unrealized appreciation (depreciation)
on securities		299						(54	)					145
Net unrealized appreciation (depreciation),
derivatives		(4	)		(4	)		10			10			--			--
Net translation of foreign currencies		(6	)		(6	)		(30	)		(30	)		(14	)		(14	)
Minimum pension liability adjustment		(638	)		(638	)		--			--			(76	)		(76	)
Other comprehensive income (loss)		(349	)					(74	)					55
Accumulated Other Comprehensive
Income (Loss), end of year					(202	)					147						221
Retained Earnings, beginning of year					9,882						9,081						8,290
Net income (loss)		(398	)		(398	)		989			989			987			987
Common dividends declared
(per share: $1.32; $1.28; $1.24)					(185	)					(188	)					(196	)
Retained Earnings, end of year					9,299						9,882						9,081
Treasury Stock, beginning of year					(8,135	)					(6,922	)					(5,199	)
Repurchase of common stock					(343	)					(1,139	)					(1,681	)
Other treasury stock transactions, net					(32	)					(74	)					(42	)
Treasury Stock, end of year					(8,510	)					(8,135	)					(6,922	)
Total Comprehensive Income (Loss) and
Shareholders' Equity	$	(747	)	$	3,867		$	915		$	5,055		$	1,042		$	5,413

The accompanying Notes to the Financial Statements are an integral part of these statements.

45

Consolidated Statements of Cash Flows

(In millions)
For the years ended December 31,		2002			2001			2000
Cash Flows from Operating Activities
Income (loss) from continuing operations	$	(397	)	$	971		$	981
Adjustments to reconcile income (loss) from continuing operations to net
cash provided by operating activities:
Insurance liabilities		1,797			(264	)		1,295
Reinsurance recoverables		161			(33	)		(453	)
Deferred policy acquisition costs		(39	)		(51	)		(164	)
Premiums, accounts and notes receivable		(261	)		(22	)		(329	)
Accounts payable, accrued expenses and other liabilities		288			93			358
Current income taxes		(417	)		198			86
Deferred income taxes		(41	)		205			(69	)
Realized investment (gains) losses		238			175			(7	)
Depreciation and amortization		221			235			221
Gains on sales of businesses (excluding discontinued operations)		(75	)		(255	)		(99	)
Other, net		(97	)		(189	)		(149	)
Net cash provided by operating activities of continuing operations		1,378			1,063			1,671
Cash Flows from Investing Activities
Proceeds from investments sold:
Fixed maturities		4,348			2,496			2,951
Equity securities		123			200			168
Mortgage loans		1,324			629			350
Other (primarily short-term investments)		5,459			2,425			2,399
Investment maturities and repayments:
Fixed maturities		2,059			2,288			2,160
Mortgage loans		928			592			968
Investments purchased:
Fixed maturities		(9,788	)		(6,169	)		(6,120	)
Equity securities		(127	)		(196	)		(247	)
Mortgage loans		(1,056	)		(1,489	)		(1,499	)
Other (primarily short-term investments)		(4,418	)		(2,431	)		(1,702	)
Proceeds on sales of businesses, net		--			350			45
Deconsolidation of Japanese life insurance operation		--			(327	)		--
Property and equipment, net		(303	)		(366	)		(313	)
Other, net		(35	)		(13	)		(62	)
Net cash used in investing activities of continuing operations		(1,486	)		(2,011	)		(902	)
Cash Flows from Financing Activities
Deposits and interest credited to contractholder deposit funds		8,535			8,565			8,765
Withdrawals and benefit payments from contractholder deposit funds		(8,253	)		(6,965	)		(7,613	)
Net change in short-term debt		(9	)		13			--
Issuance of long-term debt		--			493			--
Repayment of long-term debt		(36	)		(144	)		(101	)
Repurchase of common stock		(355	)		(1,139	)		(1,696	)
Issuance of common stock		68			38			72
Common dividends paid		(185	)		(190	)		(200	)
Net cash provided by (used in) financing activities of continuing operations		(235	)		671			(773	)
Effect of foreign currency rate changes on cash and cash equivalents		--			(1	)		(30	)
Net cash from discontinued operations		--			17			1
Net decrease in cash and cash equivalents		(343	)		(261	)		(33	)
Cash and cash equivalents, beginning of year		1,918			2,179			2,212
Cash and cash equivalents, end of year	$	1,575		$	1,918		$	2,179
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds	$	218		$	121		$	457
Interest paid	$	120		$	109		$	105

The accompanying Notes to the Financial Statements are an integral part of these statements.

46

Notes to the Financial Statements

Note 1 — Description of Business

CIGNA Corporation’s subsidiaries provide employee benefits offered through the workplace, including health care products and services, group life, accident and disability insurance, retirement products and services and investment management. CIGNA operates throughout the United States and in selected international locations.

Note 2 — Summary of Significant Accounting Policies

A. Basis of Presentation

The consolidated financial statements include the accounts of CIGNA Corporation and all significant subsidiaries, which are referred to collectively as “CIGNA.” Intercompany transactions and accounts have been eliminated in consolidation.

These consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States. Amounts recorded in the financial statements reflect management’s estimates and assumptions about medical costs, investment valuation, interest rates and other factors. Significant estimates are discussed throughout these Notes; however, actual results could differ from those estimates.

Results of operations of Lovelace Health Systems, Inc. (Lovelace), an integrated health care system and subsidiary of CIGNA, are reported as discontinued operations because CIGNA sold that business in January 2003 (see Note 4 (A)). Unless otherwise indicated, amounts in these Notes exclude the effects of discontinued operations. Certain reclassifications have also been made to prior years’ amounts to conform to the 2002 presentation.

B. Recent Accounting Pronouncements

Consolidation. In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” that provides criteria for consolidating certain entities based on majority ownership of expected losses or residual returns and must be implemented by July 1, 2003. CIGNA is currently evaluating the potential effects on its consolidated financial statements of implementing this guidance. It is possible that CIGNA could record additional assets and liabilities of up to the following approximate amounts: real estate joint venture assets and liabilities of $500 million each, including $400 million of liabilities for which there is no recourse to CIGNA; investment partnership assets and nonrecourse liabilities of $35 million each; and separate trust arrangement assets and nonrecourse liabilities of $170 million each. In the unlikely event that all of the underlying assets of these entities had no value and all other owners failed to meet their obligations, CIGNA estimates that its maximum exposure to loss would approximate $350 million, primarily representing the net carrying value of CIGNA’s investments in these entities at December 31, 2002. However, CIGNA expects to recover the recorded amounts of investments in these entities.

Goodwill and other intangible assets. As of January 1, 2002, CIGNA adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 eliminates the practice of amortizing goodwill through periodic charges to earnings and establishes a new methodology for reporting and measuring goodwill and other intangible assets.

In accordance with the standard, CIGNA ceased goodwill amortization on January 1, 2002. Although goodwill is no longer amortized, SFAS No. 142 requires goodwill to be evaluated for impairment at least annually, and written down through earnings when impaired. At implementation, CIGNA’s evaluation of its goodwill, based on discounted cash flow analyses, resulted in no impairment loss. CIGNA’s annual evaluation of its goodwill during 2002 also resulted in no impairment loss.

For comparative purposes, the following table adjusts net income (loss) and basic and diluted earnings (loss) per share for the years ended December 31, 2001 and 2000, as if goodwill amortization had ceased at the beginning of 2000. Goodwill amortization is attributable to the Employee Health Care, Life and Disability Benefits segment.

(In millions, except per share amounts)	2002			2001		2000
Reported net income (loss)	$	(398	)	$	989	$	987
Adjustment for goodwill
amortization, after-tax		--			48		48
Adjusted net income (loss)	$	(398	)	$	1,037	$	1,035
Reported basic earnings
(loss) per share	$	(2.83	)	$	6.69	$	6.18
Adjustment for goodwill
amortization, after-tax		--			0.32		0.30
Adjusted basic earnings
(loss) per share	$	(2.83	)	$	7.01	$	6.48
Reported diluted earnings
(loss) per share	$	(2.83	)	$	6.59	$	6.08
Adjustment for goodwill
amortization, after-tax		--			0.32		0.30
Adjusted diluted earnings
(loss) per share	$	(2.83	)	$	6.91	$	6.38

Impairment of long-lived assets.  As of January 1, 2002, CIGNA adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” and reclassified real estate of $119 million to “held and used” from “held for sale.” Adoption of SFAS No. 144 did not have a material effect on CIGNA’s consolidated financial statements. See Note 2(D) for further information regarding the accounting treatment of CIGNA’s real estate investments.

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Derivative instruments and hedging activities. As of January 1, 2001, CIGNA implemented SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." At implementation, SFAS No. 133 had an immaterial effect on CIGNA's consolidated financial statements. Additional information regarding SFAS No. 133 and the nature and accounting treatment of CIGNA's derivative financial instruments is included in Note 7(G).

C. Financial Instruments

In the normal course of business, CIGNA enters into transactions involving various types of financial instruments. These financial instruments include:

• various investments (such as fixed maturities and equity securities);

• short- and long-term debt; and

• off-balance-sheet instruments (such as investment and certain loan commitments and financial guarantees).

These instruments may change in value due to interest rate and market fluctuations, and most also have credit risk. CIGNA evaluates and monitors each financial instrument individually and, when management considers it appropriate, uses a derivative instrument or obtains collateral or another form of security to minimize risk of loss.

Most financial instruments that are subject to fair value disclosure requirements (such as fixed maturities and equity securities) are carried in the financial statements at amounts that approximate fair value. The following table shows the fair values and carrying values of CIGNA’s financial instruments not carried at fair value, at the end of 2002 and 2001:

(In millions)	2002				2001
	Fair Value		Carrying Value		Fair Value		Carrying Value
Mortgage loans	$	9,622	$	8,729	$	10,433	$	9,920
Contractholder
deposit funds,
excluding
universal
life products	$	20,906	$	20,268	$	19,897	$	19,524
Long-term debt	$	1,488	$	1,500	$	1,689	$	1,626

Fair values of off-balance-sheet financial instruments were not material.

Fair values of financial instruments are based on quoted market prices when available. When market prices are not available, management estimates fair value based on discounted cash flow analyses, which use current interest rates for similar financial instruments with comparable terms and credit quality. Management estimates the fair value of liabilities for contractholder deposit funds using the amount payable on demand and, for those deposit funds not payable on demand, using discounted cash flow analyses. In many cases, the estimated fair value of a financial instrument may differ significantly from the amount that could be realized if the instrument were sold immediately.

D. Investments

CIGNA’s accounting policies for investment assets are discussed below.

Fixed maturities and mortgage loans. Investments in fixed maturities include bonds, mortgage- and other asset-backed securities and redeemable preferred stocks. These investments are classified as available for sale and are carried at fair value. Fixed maturities are considered impaired, and amortized cost is written down to fair value through earnings, when management expects a decline in value to persist (i.e., the decline is “other than temporary”).

Mortgage loans are carried at unpaid principal balances. Impaired loans are carried at the lower of unpaid principal or fair value of the underlying collateral. CIGNA estimates the fair value of the underlying collateral primarily using internal appraisals. Mortgage loans are considered impaired when it is probable that CIGNA will not collect amounts due according to the terms of the loan agreement.

When an investment is current, CIGNA recognizes interest income when it is earned. CIGNA stops recognizing interest income on fixed maturities and mortgage loans when they are delinquent or have been restructured as to terms (interest rate or maturity date). Net investment income on these investments is only recognized when interest payments are actually received.

Real estate. Investment real estate can be “held and used” or “held for sale” and is typically obtained through the foreclosure of mortgage loans. As of January 1, 2002, CIGNA adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” and accounts for real estate as follows:

• Real estate “held and used” is expected to be held longer than one year and includes real estate acquired through the foreclosure of mortgage loans. CIGNA carries real estate held and used at depreciated cost less any write-downs to fair value due to impairment and assesses impairment when cash flows indicate that the carrying value may not be recoverable. Depreciation is generally calculated using the straight-line method based on the estimated useful life of the particular real estate asset.

• Real estate is “held for sale” when a buyer’s investigation is completed, a deposit has been received and the sale is expected to be completed within the next year. Real estate held for sale is carried at the lower of carrying value or current fair value, less estimated costs to sell, and is not depreciated. Valuation reserves reflect any changes in fair value.

• CIGNA uses several methods to determine the fair value of real estate, but relies primarily on discounted cash flow analyses and, in some cases, third party appraisals.

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Real estate acquired through the foreclosure of mortgage loans prior to implementation of SFAS No. 144 was generally classified as “held for sale.”

At the time of foreclosure, properties are reclassified from mortgage loans to real estate. CIGNA rehabilitates, re-leases and sells foreclosed properties. This process usually takes from two to four years unless management considers a near-term sale preferable.

Equity securities and short-term investments. CIGNA classifies equity securities and short-term investments as available for sale and carries them at fair value, which for short-term investments approximates cost. Equity securities include common and non-redeemable preferred stocks. Equity securities are considered impaired, and the cost basis is written down to fair value through earnings, when management expects a decline in value to persist.

Policy loans. Policy loans are carried at unpaid principal balances.

Other long-term investments. Other long-term investments include assets in the separate accounts in excess of separate account liabilities (see Note 2(K)). These assets are carried at fair value. Investments in unconsolidated entities in which CIGNA has significant influence are carried at cost plus CIGNA’s ownership percentage of reported income or loss. These entities include partnerships and limited liability companies holding real estate and securities.

Investment gains and losses. Realized investment gains and losses result from sales, investment asset write-downs and changes in valuation reserves, and are based on specifically identified assets. CIGNA’s net income does not include gains and losses on investment assets related to experience-rated pension policyholders’ contracts (policyholder share) because these amounts generally accrue to the policyholders.

Unrealized gains and losses on investments carried at fair value are included in accumulated other comprehensive income, net of policyholder share and deferred income taxes.

Derivative financial instruments. Note 7(G) discusses CIGNA’s accounting policies for derivative financial instruments.

E. Cash and Cash Equivalents

Cash equivalents consist of short-term investments that will mature in three months or less from the time of purchase.

F. Reinsurance Recoverables

Reinsurance recoverables are estimates of amounts that CIGNA will receive from reinsurers and are recorded net of amounts management believes will not be received.

G. Deferred Policy Acquisition Costs

Acquisition costs consist of incentive payments, commissions, premium taxes and other costs that CIGNA incurs to acquire new business. Depending on the product line they relate to, CIGNA records acquisition costs in different ways. Acquisition costs for:

•  Contractholder deposit funds and universal life products are deferred and amortized in proportion to the present value of total estimated gross profits over the expected lives of the contracts.

•  Annuity and other individual life insurance (primarily international) and group health indemnity products are deferred and amortized, generally in proportion to the ratio of periodic revenue to the estimated total revenues over the contract periods.

• Other products are expensed as incurred.

Management estimates the present value of future revenues less expected payments on products that carry deferred policy acquisition costs. If that estimate is less than the deferred costs, CIGNA reduces deferred policy acquisition costs and records an expense.

H. Property and Equipment

Property and equipment is carried at cost less accumulated depreciation. When applicable, cost includes interest, real estate taxes and other costs incurred during construction. Also included in this category is internal-use software that is acquired, developed or modified, solely to meet CIGNA’s internal needs, with no plan to market externally. Costs directly related to obtaining, developing or upgrading internal-use software are capitalized. Unamortized internal-use software costs were $500 million at December 31, 2002, and $375 million at December 31, 2001.

Most of the unamortized internal-use software costs relate to CIGNA’s health care business, which is currently engaged in a multi-year project to convert to newly designed systems and processes to support business growth and service to customers. CIGNA has incurred total costs for this project of approximately $960 million from 1999 through 2002, of which $415 million has been capitalized and $545 million has been expensed as incurred. Accumulated amortization of capitalized amounts for this project was $15 million at December 31, 2002.

Capitalized costs for this multi-year project are amortized over a 7.5 year period. The amounts of amortization will increase as additional members are migrated to the new systems.

For other capitalized costs, CIGNA calculates depreciation and amortization principally using the straight-line method based on the estimated useful life of each asset.

Accumulated depreciation and amortization was $1.1 billion at December 31, 2002 and $1.0 billion at December 31, 2001.

49

I. Goodwill

Goodwill represents the excess of the cost of businesses acquired over the fair value of their net assets. CIGNA adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” and ceased goodwill amortization as of January 1, 2002. CIGNA evaluates goodwill for impairment annually based on discounted cash flow analyses and writes it down through earnings when impaired.

J. Other Assets, including Other Intangibles

Other assets consist primarily of various insurance-related assets. CIGNA’s other intangible assets are primarily purchased customer lists and provider contracts. CIGNA amortizes other intangibles on a straight-line basis over periods ranging from six to eleven years. Management revises amortization periods if it believes there has been a change in the length of time that an intangible will continue to have value. The gross carrying value of CIGNA’s other intangible assets was $247 million at December 31, 2002 and 2001. The accumulated amortization was $113 million at December 31, 2002 and $91 million at December 31, 2001.

K. Separate Accounts

Separate account assets and liabilities are contractholder funds maintained in accounts with specific investment objectives, including assets and liabilities of separate trust arrangements for the benefit of purchasers of certain investment products. The assets of these accounts are legally segregated and are not subject to claims that arise out of any of CIGNA’s other businesses. These accounts are carried at fair value. The investment income, gains and losses of these accounts generally accrue to the contractholders and are not included in CIGNA’s revenues and expenses, except for fees earned for asset management services that are reported in premiums and fees.

L. Contractholder Deposit Funds

Liabilities for contractholder deposit funds include deposits received from customers for investment-related and universal life products and investment earnings on their fund balances. These liabilities are adjusted to reflect administrative charges, policyholder share of unrealized appreciation or depreciation on investment assets and, for universal life fund balances, mortality charges.

M. Unpaid Claims and Claim Expenses

Liabilities for unpaid claims and claim expenses are estimates of payments to be made under health coverages for reported claims and for losses incurred but not yet reported. Management develops these estimates using actuarial methods based upon historical data for payment patterns, cost trends, product mix, seasonality, utilization of health care services and other relevant factors. When estimates change, CIGNA records the adjustment in benefits, losses and settlement expenses in the period in which the change in estimate is identified.

N. Future Policy Benefits

Future policy benefits are liabilities for estimated future obligations under traditional life and health policies and annuity products currently in force. These obligations are estimated using actuarial methods and primarily consist of reserves for life and disability insurance benefits, group annuity contracts and certain specialty life reinsurance contracts.

Obligations for life and disability insurance policies represent benefits to be paid to policyholders, net of future premiums to be received. Obligations for guaranteed cost annuities represent fixed monthly benefits to be paid to a group of individuals over their remaining lives. These obligations are estimated based on assumptions as to premiums, interest rates, mortality, morbidity and surrenders, allowing for adverse deviation. Mortality, morbidity and surrender assumptions are based on either CIGNA’s own experience or actuarial tables. Interest rate assumptions are based on management’s judgement considering CIGNA’s experience and future expectations, and range from 2% to 10%, generally declining over the first 20 years.

Certain specialty life reinsurance contracts guarantee a minimum death benefit under variable annuities issued by other insurance companies. These obligations represent the guaranteed death benefit in excess of the annuitant’s account values (based on underlying equity and bond mutual fund investments.) These obligations are estimated based on assumptions and other considerations for lapse, partial surrenders, mortality, interest rates, market volatility and investment returns and premiums, consistent with the requirements of generally accepted accounting principles when a premium deficiency exists. Lapse, partial surrenders, mortality, interest rates and volatility are based on management’s judgement considering CIGNA’s experience and future expectations. The results of futures contracts are reflected in the liability calculation as a component of investment returns.

See Note 3 for additional information.

O. Unearned Premiums

Premiums for group life, accident and health insurance are recognized as revenue on a pro rata basis over the contract period. The unrecognized portion of these premiums is recorded as unearned premiums.

P. Other Liabilities

Other liabilities consist principally of postretirement and postemployment benefits and various insurance-related liabilities, including amounts related to reinsurance contracts and insurance-related assessments that management can reasonably estimate. Other liabilities also include the loss position of certain derivatives (see Note 7(G)).

50

Q. Translation of Foreign Currencies

CIGNA generally conducts its international business through foreign operating entities that maintain assets and liabilities in local currencies, which are generally their functional currencies. CIGNA uses exchange rates as of the balance sheet date to translate assets and liabilities into U.S. dollars. Translation gains or losses on functional currencies, net of applicable taxes, are recorded in accumulated other comprehensive income. CIGNA uses average exchange rates during the year to translate revenues and expenses into U.S. dollars.

R. Premiums and Fees, Revenues and Related Expenses

Premiums for group life, accident and health insurance and managed care coverages are recognized as revenue on a pro rata basis over the contract period. Benefits, losses and settlement expenses are recognized when incurred.

Premiums for individual life insurance and individual and group annuity products, excluding universal life and investment-related products, are recognized as revenue when due. Benefits, losses and settlement expenses are matched with premiums.

Revenue for investment-related products is recognized as follows:

• Net investment income on assets supporting investment-related products is recognized as earned.

• Contract fees, which are based upon related administrative expenses, are assessed against the customer’s fund balance ratably over the contract year.

Benefit expenses for investment-related products consist primarily of income credited to policyholders in accordance with contract provisions.

Revenue for universal life products is recognized as follows:

• Net investment income on assets supporting universal life products is recognized as earned.

• Fees for mortality are recognized ratably over the policy year.

• Administration fees are recognized as services are provided.

• Surrender charges are recognized as earned.

Benefit expenses for universal life products consist of benefit claims in excess of policyholder account balances. Expenses are recognized when claims are filed, and income is credited in accordance with contract provisions.

Contract fees and expenses for administrative services only programs and pharmacy programs and services are recognized as services are provided.

S. Participating Business

CIGNA’s participating life insurance policies entitle policyholders to earn dividends that represent a portion of the earnings of CIGNA’s life insurance subsidiaries. Participating insurance accounted for approximately 4% of CIGNA’s total life insurance in force at the end of 2002 and approximately 6% at the end of 2001 and 2000.

T. Income Taxes

CIGNA and its domestic subsidiaries file a consolidated United States federal income tax return.

CIGNA’s foreign subsidiaries file tax returns in accordance with applicable foreign law. Tax returns for domestic subsidiaries owning foreign affiliates include taxable income reported and credits for taxes paid by those foreign affiliates.

CIGNA generally recognizes deferred income taxes when assets and liabilities have different values for financial statement and tax reporting purposes.

Note 13 contains detailed information about CIGNA’s income taxes.

U. Stock Compensation

CIGNA uses the intrinsic value method of accounting for stock-based compensation. Under this method, no compensation expense is recorded for stock options because their exercise price is equal to the market price of CIGNA common stock on the date of grant. Compensation expense is recorded for restricted stock grants over their vesting periods based on fair value, which is equal to the market price of CIGNA common stock on the date of grant. The following illustrates the effect on reported net income (loss) and earnings (loss) per share if CIGNA recorded compensation expense based on the fair value method of accounting for all stock awards (using the Black-Scholes option-pricing model for stock options).

(In millions, except per share amounts)	2002			2001			2000
Net income (loss), as
reported	$	(398	)	$	989		$	987
Compensation expense for
restricted stock grants at
fair value, net of taxes,
included in net income
(loss) as reported		14			12			10
Total compensation expense
for stock options and
restricted stock grants
under fair value method
for all awards, net of
taxes		(63	)		(62	)		(51	)
Pro forma net income (loss)	$	(447	)	$	939		$	946
Net income (loss) per share:
Basic - as reported	$	(2.83	)	$	6.69		$	6.18
Basic - pro forma	$	(3.18	)	$	6.35		$	5.92
Diluted - as reported	$	(2.83	)	$	6.59		$	6.08
Diluted - pro forma	$	(3.18	)	$	6.27		$	5.85

See also Note 15 for further discussion of CIGNA’s stock plans.

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Note 3 — Charges for the Run-off Reinsurance Operations

A. Losses on Specialty Life Reinsurance Contracts

In 2002, CIGNA recognized an after-tax charge of $720 million ($1.1 billion pre-tax) to strengthen reserves related to certain specialty life reinsurance contracts and the adoption of a program to substantially reduce equity market risks related to these contracts.

CIGNA’s reinsurance operations, which were discontinued in 2000 and are now an inactive business in run-off mode, reinsured a guaranteed minimum death benefit under certain variable annuities issued by other insurance companies. These variable annuities are essentially investments in mutual funds combined with a death benefit. Death benefits under the annuity contracts reinsured by CIGNA are determined using various methods.

The majority of CIGNA’s exposure arises under annuities that guarantee that the benefit received at death will be no less than the highest historical account value of the related mutual fund investments on an annuitant’s contract anniversary date. Under this type of death benefit, CIGNA is liable to the extent the highest historical anniversary account value exceeds the fair value of the related mutual fund investments at the time of an annuitant’s death. Other annuity designs that CIGNA reinsured guarantee that the benefit received at death will be no less than net deposits paid into the contract accumulated at a specified rate or net deposits paid into the contract. In periods of declining equity markets and in periods of flat equity markets following a decline, CIGNA’s liabilities for these guaranteed minimum death benefits increase.

As a result of equity market declines and volatility in 2002, CIGNA evaluated alternatives for addressing the exposures associated with these reinsurance contracts, considering the possibility of continued depressed equity market conditions, the potential effects of further market declines and the impact on future earnings and capital. As a result of this evaluation, CIGNA implemented a program to substantially reduce the equity market exposures of this business by selling exchange-traded futures contracts and, potentially, other instruments, which are expected to rise in value as the equity market declines and decline in value as the equity market rises.

The purpose of this program is to substantially reduce the adverse effects of potential future stock market declines on CIGNA’s liabilities for certain reinsurance contracts, as increases in liabilities under the reinsurance contracts from a declining market will be substantially offset by gains on the futures contracts. A consequence of this program is that it also substantially reduces the positive effects of potential future equity market increases, as reductions in liabilities under these contracts from improved equity market conditions will be substantially offset by losses on the futures contracts.

In order to achieve the objective of this program, CIGNA expects to adjust its futures contract position and possibly enter into other positions over time to reflect changing equity market levels and changes in the investment mix of the underlying variable annuity investments.

The $720 million after-tax charge consists of:

• $620 million after-tax, principally reflecting the reduction in assumed future equity market returns as a result of implementing the program and, to a lesser extent, changes to the policy lapse, mortality, market volatility and interest rate assumptions used in estimating the liabilities for these contracts. CIGNA determines liabilities under the reinsurance contracts using an assumption for expected future performance of equity markets. A consequence of implementing the program is, effectively, a reduction in the assumption for expected future performance of equity markets, as the futures contracts essentially eliminate the opportunity to achieve previously expected market returns; and

• $100 million after-tax reflecting deterioration in equity markets that occurred in the third quarter of 2002 (prior to implementation of the program).

CIGNA recorded a pre-tax gain of $87 million in 2002 in other revenues to reflect the increase in the fair values of futures contracts since the inception of the program. A corresponding expense reflecting the increase in liabilities for the specialty life reinsurance contracts is included in benefits, losses and settlement expenses.

CIGNA had reserves for these liabilities of approximately $1.4 billion as of December 31, 2002, and approximately $300 million as of December 31, 2001.

Management estimates reserves for variable annuity death benefit exposure based on assumptions and other considerations, including lapse, partial surrender, mortality, interest rates and volatility. These are based on CIGNA’s experience and future expectations. CIGNA monitors actual experience to update these reserve estimates as necessary.

52

Lapse refers to the full surrender of an annuity prior to an annuitant’s death. Volatility refers to market volatility that affects the costs of the program adopted by CIGNA to reduce equity market risks associated with these liabilities.

Partial surrender refers to the fact that most annuitants have the ability to withdraw substantially all of their mutual fund investments while retaining any available death benefit coverage in effect at the time of the withdrawal. A very small percentage of annuitants have elected partial surrenders to date. An increase in CIGNA’s liabilities for variable annuity death benefits due to partial surrenders would depend on many factors, including financial market conditions prior to surrender and annuitant behavior.

The determination of reserves for variable annuity death benefits requires CIGNA to make critical accounting estimates. Management believes the current assumptions and other considerations used to estimate reserves for these liabilities are appropriate. However, if actual experience differs from the assumptions and other considerations (including lapse, partial surrender, mortality, interest rates and volatility) used in estimating these reserves, the resulting change could have a material adverse effect on CIGNA’s consolidated results of operations, and in certain situations, could have a material adverse effect on CIGNA’s financial condition.

As of December 31, 2002, the aggregate fair value of the underlying mutual fund investments was approximately $50 billion. The death benefit coverage in force as of that date (representing the amount that CIGNA would have to pay if all 1.5 million annuitants had died on that date) was approximately $23.4 billion. The death benefit coverage in force represents the excess of the guaranteed benefit amount over the fair value of the underlying mutual fund investments. The notional amount of the futures contract positions held by CIGNA at December 31, 2002, was $2.2 billion.

During 2000, CIGNA recorded after-tax charges for the run-off reinsurance business totaling $127 million as follows:

• a charge of $84 million to strengthen reserves, following a review of reserve assumptions for specialty life reinsurance contracts that guarantee certain minimum death benefits based on unfavorable changes in variable annuity account values. These values are derived from underlying equity and bond mutual fund investments as more fully discussed above;

• a charge of $40 million to strengthen reserves for personal accident reinsurance contracts; and

• a charge of $3 million for restructuring costs (principally severance).

B. Other Reinsurance Charges

CIGNA also recognized an after-tax charge of $317 million ($408 million pre-tax) in the third quarter of 2002 for Unicover and other run-off reinsurance exposures, including London reinsurance business. For further information on these charges, see Note 17.

Note 4 — Acquisitions and Dispositions

Over the long term, CIGNA’s priorities for use of capital are internal growth, acquisitions and share repurchase. Given the capital needs of CIGNA’s principal subsidiary (Connecticut General Life Insurance Company) primarily resulting from the charges for the run-off reinsurance operations (see Note 3), CIGNA intends to retain capital and has suspended share repurchase. CIGNA conducts regular strategic and financial reviews of its businesses to ensure that its capital is used effectively. As a result of these reviews, CIGNA may from time to time acquire or dispose of assets, subsidiaries or lines of business. Significant transactions are described below.

A. Sale of Lovelace Health Systems

In January 2003, CIGNA sold the operations of Lovelace, an integrated health care system located in New Mexico that includes a multi-specialty physician group practice, a hospital, family practice clinics and a health plan, for cash proceeds of approximately $210 million. The sale generated an after-tax gain of approximately $30 million which will be recognized in the first quarter of 2003. In the fourth quarter of 2002, CIGNA began reporting this business as discontinued operations and prior year financial information has been reclassified.

During 2002, CIGNA increased reserves for a Medicare cost reporting matter associated with Lovelace (see page 73) by $9 million after-tax ($14 million pre-tax). In the fourth quarter of 2002, Lovelace entered into a settlement agreement with the federal government related to this matter. This charge is included in results of discontinued operations.

Summarized financial data for discontinued operations are outlined below:

(In millions)	2002			2001		2000
Income Statement Data
Revenues	$	567		$	508	$	468
Income before taxes	$	1		$	28	$	10
Income taxes		2			10		4
Income (loss) from
discontinued operations	$	(1	)	$	18	$	6

(In millions)	2002		2001
Balance Sheet Data
Cash	$	23	$	15
Accounts receivable		34		34
Property and equipment		94		91
Goodwill and other assets		49		39
Total assets	$	200	$	179
Insurance liabilities	$	47	$	37
Accounts payable and other liabilities		28		25
Total liabilities	$	75	$	62

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B. Sale of Brazilian Health Care Operations

In January 2003, CIGNA sold its Brazilian health care operations. CIGNA expects to record a net gain of approximately $15 million after-tax in the first quarter of 2003 associated with this sale, primarily as a result of the disposition of the net liabilities associated with these operations. The gain will be reported as part of discontinued operations. Revenues, expenses and results of operations of the Brazilian health care operations are not material to CIGNA’s consolidated financial statements.

C. Sales of Interests in Japanese Life Insurance Operation

In 2001, CIGNA sold portions of its interest in its Japanese life insurance operation as follows:

Date of Sale	Portion of CIGNA Equity Ownership Interest Sold*		Equity Ownership Interest Retained by CIGNA*		Proceeds from Sale (in millions)		Gain on Sale, after- tax (in millions)
Jan. 2001		21%		40%	$	83	$	8
Nov. 2001		40%		--	$	267	$	27

* Prior to the January 2001 sale, CIGNA owned 61% of the Japanese life insurance operation.

As a result of the January 2001 sale, CIGNA stopped consolidating the assets, liabilities, revenues and expenses of this operation and, until the November 2001 sale, accounted for its remaining interest under the equity method of accounting.

D. Sale of Portions of U.S. Life Reinsurance Business

As of June 1, 2000, CIGNA sold its U.S. individual life, group life and accidental death reinsurance business for cash proceeds of approximately $170 million. The sale generated an after-tax gain of approximately $85 million, but recognition of that gain was deferred because the sale was structured as an indemnity reinsurance arrangement.

During 2002 and 2001, the acquirer entered into agreements with the reinsured parties, relieving CIGNA of any remaining obligations to those parties. As a result, CIGNA accelerated the recognition of $3 million after-tax of the deferred gain in 2002 and $69 million after-tax in 2001. In addition to the accelerated gain recognition, CIGNA recognized less than $1 million after-tax of the deferred gain in the Run-off Reinsurance Operations segment in 2002, compared with $9 million after-tax in 2001. The remaining deferred gain as of December 31, 2002, was approximately $1 million after-tax.

CIGNA has placed its remaining reinsurance businesses (including its accident, domestic health, international life and health, and specialty life reinsurance businesses) into run-off and has stopped underwriting new reinsurance business. See also Notes 3 and 17 for further discussions related to the Run-off Reinsurance Operations segment.

E. Sale of Individual Life Insurance and Annuity Business

In 1998, CIGNA sold its individual life insurance and annuity business for cash proceeds of $1.4 billion. The sale generated an after-tax gain of approximately $770 million, the majority of which was deferred and is recognized at the rate that earnings from the sold business would have been expected to emerge (primarily over 15 years on a declining basis). CIGNA recognized $48 million after-tax of the deferred gain in 2002, $52 million after-tax in 2001 and $57 million after-tax in 2000. The remaining deferred gain as of December 31, 2002, was $283 million after-tax.

Note 5 — Restructuring Programs

A. Fourth Quarter 2002 Program

In the fourth quarter of 2002, CIGNA adopted a restructuring program primarily to realign the organizational structure and operations of its health care business. As a result, CIGNA recognized in operating expenses an after-tax charge of $97 million ($151 million pre-tax) in the Employee Health Care, Life and Disability Benefits segment. The after-tax charge consisted of $74 million of severance costs ($116 million pre-tax), $22 million in real estate costs ($34 million pre-tax) related to vacating certain leased facilities and $3 million ($4 million pre-tax) of asset impairment charges. These amounts were partially offset by a reduction in costs of $2 million after-tax ($3 million pre-tax) for other postretirement benefits for employees terminated in 2002. This benefit cost reduction will continue in 2003 as additional employees are terminated, aggregating approximately $11 million after-tax ($17 million pre-tax).

The severance charge reflected the expected reduction of approximately 3,900 employees. As part of the plan, CIGNA expects to hire approximately 650 employees to support newly consolidated operations, thereby resulting in a net reduction of approximately 3,250 employees under this program. As of December 31, 2002, approximately 700 employees had been terminated under the program. As of December 31, 2002, CIGNA had paid $4 million related to severance under this program.

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CIGNA expects this restructuring program to be substantially completed by year-end 2003. The table below shows CIGNA’s restructuring activity (pre-tax) related to severance and real estate for this program:

	Severance
(Dollars in millions)	No. of Employees			Cost			Real Estate			Total Charge
Fourth quarter 2002
charge		3,890		$	116		$	38		$	154
Fourth quarter 2002
activity:
Employees		(713	)		(4	)					(4	)
Lease costs								--			--
Asset write-downs								(4	)		(4	)
Balance as of
December 31, 2002		3,177		$	112		$	34		$	146

B. Fourth Quarter 2001 Program

In the fourth quarter of 2001, CIGNA adopted a restructuring program primarily to consolidate existing health service centers into regional service centers. As a result, CIGNA recognized in operating expenses an after-tax charge of $62 million ($96 million pre-tax) in the Employee Health Care, Life and Disability Benefits segment. The after-tax charge consisted of $31 million of severance costs ($48 million pre-tax) and $31 million in real estate costs ($48 million pre-tax) related to vacating certain leased facilities.

The severance charge reflected the expected reduction of approximately 3,100 employees. As a result of the consolidation of health service centers, CIGNA hired approximately 1,100 employees, thereby resulting in a net reduction of approximately 2,000 employees under this program. As of December 31, 2002, approximately 2,800 employees had been terminated under the program (2,366 employees were terminated in 2002). The real estate charges consisted of $37 million pre-tax related to vacating leased facilities, which are cash obligations pertaining to non-cancelable lease obligations and lease termination penalties. The charge also included $11 million pre-tax of non-cash asset write-downs. As of December 31, 2002, CIGNA had paid $44 million related to severance and vacating leased facilities under this program ($38 million was paid in 2002).

This restructuring program was substantially completed in the fourth quarter of 2002. The table below shows CIGNA’s restructuring activity (pre-tax) for this program:

	Severance
(Dollars in millions)	No. of Employees			Cost			Real Estate			Total Charge
Fourth quarter 2001
charge		3,100		$	48		$	48		$	96
Fourth quarter 2001
activity:
Employees		(436	)		(5	)					(5	)
Lease costs								(1	)		(1	)
Asset write-downs								(11	)		(11	)
Balance as of
December 31, 2001		2,664			43			36			79
2002 activity:
Employees		(2,366	)		(36	)					(36	)
Lease costs								(2	)		(2	)
Adjustment of
remaining balance		(143	)		7			(11	)		(4	)
Balance as of
December 31, 2002		155		$	14		$	23		$	37

During 2002, CIGNA made certain adjustments associated with this restructuring program, resulting in a net adjustment of $4 million pre-tax ($2 million after-tax).

Note 6 — Events of September 11, 2001

As a result of claims arising from the events of September 11, 2001, CIGNA recorded after-tax charges of $25 million in 2001. These charges, which are net of reinsurance, primarily related to life, accident and disability claims and, to a lesser extent, higher utilization of managed behavioral health services. These charges were reported by segment as follows: Employee Health Care, Life and Disability Benefits, $20 million; Employee Retirement Benefits and Investment Services, $3 million; and Run-off Reinsurance Operations, $2 million. During the fourth quarter of 2002, CIGNA revised its estimate of liabilities associated with the events of September 11, 2001, and recognized an after-tax credit of $2 million in the Run-off Reinsurance Operations segment.

Note 7 — Investments

CIGNA’s investments, as recorded on the balance sheet, include policyholder share. Policyholder share includes the investment assets related to experience-rated pension policyholder contracts. See Note 9(B) for discussion on the investment gains and losses associated with policyholder share.

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A. Fixed Maturities

The amortized cost and fair value by contractual maturity periods for fixed maturities, including policyholder share, were as follows at December 31, 2002:

(In millions)	Amortized Cost	Fair Value
Due in one year or less	$1,169	$1,211
Due after one year through five years	6,505	6,889
Due after five years through ten years	7,473	8,029
Due after ten years	4,712	5,362
Mortgage- and other asset-backed
securities	6,089	6,312
Total	$25,948	$27,803

Actual maturities could differ from contractual maturities because issuers may have the right to call or prepay obligations, with or without penalties. Also, in some cases CIGNA may extend maturity dates.

Gross unrealized appreciation (depreciation) on fixed maturities, including policyholder share, by type of issuer was as follows:

	December 31, 2002
(In millions)	Amortized Cost		Unrealized Appreciation		Unrealized Depreciation			Value
Federal government
and agency	$	956	$	241	$	--		$	1,197
State and local
government		1,612		151		(2	)		1,761
Foreign government		751		79		(5	)		825
Corporate		16,628		1,376		(208	)		17,796
Federal agency
mortgage-backed		1,638		31		--			1,669
Other
mortgage-backed		2,158		112		(5	)		2,265
Other asset-backed		2,205		132		(47	)		2,290
Total	$	25,948	$	2,122	$	(267	)	$	27,803

	December 31, 2001
Federal government
and agency	$	329	$	170	$	--		$	499
State and local
government		1,544		62		(10	)		1,596
Foreign government		588		35		(13	)		610
Corporate		14,733		711		(233	)		15,211
Federal agency
mortgage-backed		616		15		(4	)		627
Other
mortgage-backed		2,341		57		(54	)		2,344
Other asset-backed		2,521		78		(85	)		2,514
Total	$	22,672	$	1,128	$	(399	)	$	23,401

As of December 31, 2002, CIGNA had commitments to purchase $80 million of fixed maturities. Most of these commitments are to purchase unsecured investment grade bonds bearing interest at a fixed market rate. These bond commitments are diversified by issuer and maturity date. CIGNA expects to disburse all of the committed amounts in 2003.

B. Mortgage Loans, Real Estate and Other Long-Term Investments

CIGNA’s mortgage loans and real estate investments are diversified by property type, location and, for mortgage loans, borrower. Mortgage loans, which are secured by the related property, are generally made at less than 70% of the property’s value.

At December 31, the carrying values of mortgage loans and real estate investments, including policyholder share, were as follows:

(In millions)	2002		2001
Mortgage loans	$	8,729	$	9,920
Real estate:
Held for sale		18		248
Held and used		235		184
Total real estate		253		432
Total	$	8,982	$	10,352

At December 31, mortgage loans and real estate investments were distributed among the following property types and geographic regions:

(In millions)	2002		2001
Property type
Retail facilities	$	2,357	$	3,231
Office buildings		3,845		4,254
Apartment buildings		1,177		1,313
Industrial		789		756
Hotels		597		549
Other		217		249
Total	$	8,982	$	10,352
Geographic region
Central	$	2,315	$	2,850
Pacific		1,997		2,070
South Atlantic		1,897		1,967
Middle Atlantic		1,383		1,660
Mountain		887		909
Other		503		896
Total	$	8,982	$	10,352

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Mortgage loans. At December 31, 2002, scheduled mortgage loan maturities were as follows (in billions, unless otherwise indicated): $800 million in 2003, $1.5 in 2004, $1.1 in 2005, $1.2 in 2006, $1.2 in 2007 and $2.9 thereafter.

Actual maturities could differ from contractual maturities for several reasons: borrowers may have the right to prepay obligations, with or without prepayment penalties; the maturity date may be extended; and loans may be refinanced.

As of December 31, 2002, CIGNA had commitments to extend credit under commercial mortgage loan agreements of $154 million, most of which were at a fixed market rate of interest. These loan commitments are diversified by property type and geographic region. CIGNA expects to disburse all of the committed amounts in 2003.

At December 31, impaired mortgage loans and valuation reserves were as follows:

(In millions)	2002		2001
Impaired loans with no valuation reserves	$	204	$	105
Impaired loans with valuation reserves		46		99
Total impaired loans		250		204
Less valuation reserves		11		15
Net impaired loans	$	239	$	189

During the year ended December 31, changes in reserves for impaired mortgage loans, including policyholder share, were as follows:

(In millions)	2002			2001
Reserve balance -- January 1	$	15		$	37
Transfers to foreclosed real estate		--			(22	)
Charge-offs upon sales		(27	)		(5	)
Net change in reserves		23			5
Reserve balance -- December 31	$	11		$	15

Impaired mortgage loans, before valuation reserves, averaged approximately $257 million in 2002 and $202 million in 2001. Interest income recorded (cash received) on impaired loans was approximately $19 million in 2002 and $16 million in 2001.

During 2002, CIGNA refinanced approximately $82 million of its mortgage loans at then-current market rates for borrowers unable to obtain alternative financing. There were no such refinancings in 2001.

Real estate and other long-term investments.  During 2002, non-cash investing activities did not include any real estate acquired through foreclosure of mortgage loans, compared to $110 million for 2001 and $86 million for 2000. The total of valuation reserves and cumulative write-downs related to real estate, including policyholder share, was $97 million at the end of 2002 compared to $125 million at the end of 2001. Net investment income from real estate held for sale (excluding policyholder share) was $4 million for 2002, $10 million for 2001 and $7 million for 2000. Write-downs upon foreclosure and changes in valuation reserves (excluding policyholder share) were $9 million after-tax for 2002, $6 million after-tax for 2001 and not material in 2000.

As of December 31, 2002, CIGNA had commitments to contribute additional equity (recorded in other long-term investments) of $53 million to existing real estate joint ventures that are diversified by property type and geographic region, and $70 million to existing security partnerships that hold securities which are diversified by issuer and maturity date. CIGNA expects to disburse approximately 95% of the committed amounts in 2003.

C. Short-Term Investments and Cash Equivalents

Short-term investments and cash equivalents included corporate securities of $439 million, federal government securities of $328 million and money market funds of $216 million at December 31, 2002. CIGNA’s short-term investments and cash equivalents at December 31, 2001, included money market funds of $244 million, other asset-backed securities of $209 million and corporate securities of $940 million.

D. Net Unrealized Appreciation (Depreciation) on Investments

Unrealized appreciation (depreciation) on investments carried at fair value at December 31 was as follows:

(In millions)	2002			2001
Unrealized appreciation:
Fixed maturities	$	2,122		$	1,128
Equity securities		87			161
		2,209			1,289
Unrealized depreciation:
Fixed maturities		(267	)		(399	)
Equity securities		(31	)		(67	)
		(298	)		(466	)
		1,911			823
Less policyholder-related amounts		1,083			452
Shareholder net unrealized
appreciation		828			371
Less deferred income taxes		290			132
Net unrealized appreciation	$	538		$	239

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E. Non-Income Producing Investments

As of December 31, the carrying values of investments, including policyholder share, that were non-income producing during the preceding twelve months were as follows:

(In millions)	2002		2001
Fixed maturities	$	47	$	44
Mortgage loans		--		1
Real estate		39		122
Other long-term investments		105		91
Total	$	191	$	258

F. Concentration of Risk

As of December 31, 2002 and 2001, CIGNA did not have a concentration of investments in a single issuer or borrower exceeding 10% of shareholders’ equity.

G. Derivative Financial Instruments

CIGNA’s investment strategy is to manage the characteristics of investment assets (such as duration, yield, currency and liquidity) to meet the varying demands of the related insurance and contractholder liabilities (such as paying claims, investment returns and withdrawals). As part of this investment strategy, CIGNA typically uses derivatives to minimize interest rate, foreign currency and equity price risks. CIGNA routinely monitors exposure to credit risk associated with derivatives and diversifies the portfolio among approved dealers of high credit quality to minimize credit risk. In addition, CIGNA has written reinsurance contracts with issuers of variable annuity contracts that provide annuitants with certain guarantees related to minimum income benefits.

As of January 1, 2001, CIGNA implemented SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” At implementation, SFAS No. 133 had an immaterial effect on CIGNA’s consolidated financial statements. SFAS No. 133 allows companies to use hedge accounting when derivatives are designated, qualify and are highly effective as hedges. Under hedge accounting, the changes in fair value of the derivative and the hedged risk are generally recognized together and offset each other when reported in net income.

Beginning on January 1, 2001, CIGNA accounts for derivative instruments as follows:

• Derivatives are reported on the balance sheet at fair value with changes in fair values reported in net income or accumulated other comprehensive income.

• Changes in the fair value of derivatives that hedge market risk related to future cash flows –and that qualify for hedge accounting –are reported in a separate caption in accumulated other comprehensive income. These hedges are referred to as cash flow hedges.

• A change in the fair value of a derivative instrument may not always equal the change in the fair value of the hedged item; this difference is referred to as hedge ineffectiveness. Where hedge accounting is used, CIGNA reflects hedge ineffectiveness in net income (generally as part of realized investment gains and losses).

• Features of certain investments and obligations are accounted for as derivatives, such as certain fixed maturities’ investment returns that are based on the performance of commercial loan pools. As permitted under SFAS No. 133, derivative accounting has not been applied to such features of investments or obligations existing before January 1, 1999.

In 2002, CIGNA implemented a program to substantially reduce the equity market exposures for certain specialty life reinsurance contracts by selling exchange-traded futures contracts. CIGNA recorded a pre-tax gain of $87 million in other revenues reflecting the net change in the fair values of these futures contracts. See Note 3 for further discussion.

In 2002, CIGNA recorded a pre-tax loss of $16 million in other operating expenses reflecting the net changes in fair value (due to stock market declines and changes in assumptions used) for certain other specialty life reinsurance contracts that guarantee minimum income benefits. See Note 21 for further discussion.

In 2001, CIGNA recorded $10 million pre-tax in other operating expenses reflecting the decline in fair value of forward starting swaps used to hedge a mortgage loan participation held for sale. The increase in fair value of the participation through the date of sale was $5 million pre-tax, reported in other revenues. CIGNA also recorded $13 million pre-tax in realized investment losses in 2001 for embedded derivatives whose fair value is based on the performance of underlying commercial loan pools.

The other effects of derivatives were not material to CIGNA’s consolidated results of operations, liquidity or financial condition for 2002, 2001 or 2000.

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The table below presents information about the nature and accounting treatment of CIGNA’s primary derivative financial instruments. Derivatives in CIGNA’s separate accounts are not included because associated gains and losses generally accrue directly to policyholders.

Instrument	Risk	Purpose	Cash Flows	Accounting Policy (Beginning January 1, 2001*)
Futures	Primarily equity risks	CIGNA sells futures contracts to reduce the equity market exposures for certain specialty life reinsurance contracts that guarantee death benefits resulting from changes in variable annuity account values based on underlying mutual funds.	CIGNA receives (pays) cash daily in the amount of the change in fair value of the futures contracts.	Fair value changes are reported in other revenues.
	Interest rate risk	CIGNA hedges fair value changes of fixed maturity and mortgage loan investments to be purchased.	CIGNA receives (pays) cash daily in the amount of the change in fair value of the futures contracts.	Using cash flow hedge accounting, fair value changes are reported in other comprehensive income and amortized into net investment income over the life of the investments purchased.
Swaps	Interest rate and foreign currency risk	CIGNA hedges the interest or foreign currency cash flows of fixed maturities to match associated liabilities. Currency swaps are primarily euros and extend for periods of up to 19 years.	CIGNA periodically exchanges cash flows between variable and fixed interest rates or between two currencies for both principal and interest.	Using cash flow hedge accounting, fair values are reported in other long-term investments or other liabilities and other comprehensive income. Net interest cash flows are reported in net investment income.
Forward Swaps	Interest rate risk	CIGNA hedges fair value changes of fixed maturity and mortgage loan investments primarily related to experience-rated pension policyholder contracts.	CIGNA periodically exchanges the difference between variable and fixed rate asset cash flows, to begin at a designated future date.	Fair values are reported in other long-term investments or other liabilities and in contractholder deposit fund liabilities, with no effect on net income.
		CIGNA hedges fair value changes of mortgage loan participations to be sold.	CIGNA receives (pays) cash in the amount of fair value changes when the mortgage loan participation is sold.	Fair values of the forward swaps are reported in other assets or liabilities, with changes reported in other revenues or other operating expenses.
Embedded Swaps	Interest rate and credit risk	CIGNA purchases fixed maturities with investment return features that are based on the performance of underlying commercial loan pools.	CIGNA receives cash based on the performance of underlying commercial loan pools.	Fair values of the embedded return features are reported in fixed maturities, with changes reported in realized gains and losses.
Written and Purchased Options	Primarily equity risk	CIGNA has written certain specialty life reinsurance contracts to guarantee minimum income benefits resulting from unfavorable changes in variable annuity account values based on underlying mutual funds. CIGNA purchased reinsurance contracts to hedge the market risks assumed. These contracts are accounted for as written and purchased options.	CIGNA periodically receives (pays) fees and will pay (receive) cash resulting from the unfavorable changes in account values when account holders elect to receive minimum income payments.	Fair values are reported in other liabilities and other assets. Changes in fair value are reported in other revenues or other operating expenses.
		CIGNA has written certain universal life insurance contracts that credit income to policyholders based on the change in an equity index. CIGNA purchased options to hedge the effect of income credited under these contracts.	Under written options, CIGNA may be required to make payments to policyholders at the end of the contract, depending on the change in an equity index. Under purchased options, CIGNA pays an up-front fee to third parties, and may receive cash at the end of the contract based on the change in this equity index.	Fair values of written options are reported in contractholder deposit fund liabilities, with changes reported in benefit expense. Fair values of purchased options are reported in other assets or liabilities, with changes reported in other revenues or other operating expenses.

* Prior to January 1, 2001, accounting policies differed as follows: the fair value of swaps was reported with fixed maturities; changes in fair value of embedded swaps were included in other comprehensive income with the fair value of fixed maturities; changes in the fair value of futures were reported with fixed maturities and mortgage loan investments; and purchased options were reported in benefit expense at amortized cost adjusted for any change in equity indexes.

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Note 8 — Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) (which exclude policyholder share) were as follows:

(In millions)	Pre-Tax			Tax (Expense) Benefit			After-Tax
2002
Net unrealized
appreciation, securities:
Unrealized appreciation on
securities held	$	202		$	(69	)	$	133
Losses realized on securities		256			(90	)		166
Net unrealized appreciation,
securities	$	458		$	(159	)	$	299
Net unrealized depreciation,
derivatives	$	(6	)	$	2		$	(4	)
Net translation of foreign
currencies	$	(8	)	$	2		$	(6	)
Minimum pension liability
adjustment	$	(981	)	$	343		$	(638	)
2001
Net unrealized
depreciation, securities:
Unrealized depreciation on
securities held	$	(145	)	$	46		$	(99	)
Losses realized on securities		167			(58	)		109
Gains realized on sale of
business		(92	)		32			(60	)
Reclassification to establish
separate caption for
derivatives		(6	)		2			(4	)
Net unrealized depreciation,
securities	$	(76	)	$	22		$	(54	)
Net unrealized
appreciation derivatives:
Reclassification to establish
separate caption for
derivatives	$	6		$	(2	)	$	4
Unrealized appreciation on
derivatives held		9			(3	)		6
Net unrealized appreciation,
derivatives	$	15		$	(5	)	$	10
Net translation of foreign
currencies:
Net translation on foreign
currencies held	$	(40	)	$	9		$	(31	)
Foreign currency translation
losses
realized on sale of business		2			(1	)		1
Net translation of foreign
currencies	$	(38	)	$	8		$	(30	)
2000
Net unrealized
appreciation, securities:
Unrealized appreciation on
securities held	$	216		$	(76	)	$	140
Losses realized on securities		7			(2	)		5
Net unrealized appreciation,
securities	$	223		$	(78	)	$	145
Net translation of foreign
currencies	$	(21	)	$	7		$	(14	)
Minimum pension liability
adjustment	$	(117	)	$	41		$	(76	)

Note 9 — Investment Income and Gains and Losses

A. Net Investment Income

The components of net investment income, including policyholder share, for the year ended December 31 were as follows:

(In millions)	2002		2001		2000
Fixed maturities	$	1,774	$	1,722	$	1,757
Equity securities		10		10		10
Mortgage loans		707		772		774
Policy loans		177		208		204
Real estate		63		94		113
Other long-term investments		34		56		60
Short-term investments and
cash		38		73		139
		2,803		2,935		3,057
Less investment expenses		87		93		117
Net investment income	$	2,716	$	2,842	$	2,940

Net investment income attributable to policyholder contracts (which is included in CIGNA’s revenues and is primarily offset by amounts included in benefits, losses and settlement expenses) was approximately $1.3 billion for 2002, $1.5 billion for 2001 and $1.4 billion for 2000. Net investment income for separate accounts (which is not reflected in CIGNA’s revenues) was $790 million for 2002, $1.0 billion for 2001 and $2.0 billion for 2000.

Fixed maturities and mortgage loans on which CIGNA recognizes interest income only when cash is received (referred to as non-accrual investments), including policyholder share, were as follows at December 31:

(In millions)	2002		2001
Restructured	$	164	$	268
Delinquent		126		76
Total non-accrual investments	$	290	$	344

Net investment income was $25 million lower in 2002, $20 million in 2001 and $9 million in 2000 than it would have been if interest on non-accrual investments had been recognized in accordance with the original terms of these investments.

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B. Realized Investment Gains and Losses

Realized gains and losses on investments, excluding policyholder share, for the year ended December 31 were as follows:

(In millions)	2002			2001			2000
Fixed maturities	$	(193	)	$	(204	)	$	(59	)
Equity securities		(63	)		37			52
Mortgage loans		(10	)		(2	)		(12	)
Real estate		24			(12	)		22
Other		4			6			4
		(238	)		(175	)		7
Less income taxes (benefits)		(83	)		(63	)		3
Net realized investment
gains (losses)	$	(155	)	$	(112	)	$	4

Realized investment gains and losses included impairments in the value of investments, net of recoveries, of $230 million in 2002, $214 million in 2001 and $70 million in 2000.

Based on contractual provisions, gains and losses on assets related to separate account contracts generally accrue to the contractholders. Under the experience-rating process, gains and losses on assets related to policyholder contracts generally accrue to the contractholders. Realized investment gains and losses that are therefore not reflected in CIGNA’s revenues for the year ended December 31 were as follows:

(In millions)	2002			2001			2000
Separate accounts	$	(1,925	)	$	(819	)	$	1,787
Policyholder contracts	$	(432	)	$	(116	)	$	(83	)

Sales of available-for-sale fixed maturities and equity securities, including policyholder share, for the year ended December 31 were as follows:

(In millions)	2002			2001			2000
Proceeds from sales	$	4,471		$	2,696		$	3,119
Gross gains on sales	$	136		$	189		$	121
Gross losses on sales	$	(326	)	$	(178	)	$	(109	)

Note 10 — Debt

Short-term and long-term debt consisted of the following at December 31:

(In millions)	2002		2001
Short-term
Current maturities of long-term debt	$	127	$	36
Short-term notes		3		13
Total short-term debt	$	130	$	49
Long-term
Uncollateralized debt:
7.4% Notes due 2003	$	--	$	100
6 3/8% Notes due 2006		100		100
7.4% Notes due 2007		300		300
8 1/4% Notes due 2007		100		100
7% Notes due 2011		250		250
6.375% Notes due 2011		250		250
7.65% Notes due 2023		100		100
8.3% Notes due 2023		17		17
7 7/8% Debentures due 2027		300		300
8.3% Step Down Notes due 2033		83		83
Medium-term Notes		--		26
Total long-term debt	$	1,500	$	1,626

CIGNA may issue commercial paper primarily to manage imbalances between operating cash flows and existing commitments, to meet working capital needs, and to take advantage of current investment opportunities. Commercial paper borrowing arrangements are supported by various lines of credit. There was no commercial paper outstanding as of December 31, 2002 and 2001.

CIGNA’s medium-term notes have original maturity dates ranging from approximately seven to ten years, and interest rates ranging from 6.6% to 8.0%. The weighted average interest rate on CIGNA’s outstanding medium-term notes was 7.5% at December 31, 2002, and 7.3% at December 31, 2001.

As of December 31, 2002, CIGNA had available $215 million in committed lines of credit provided by U.S. banks. These lines of credit typically have terms ranging from one to three years and are paid for with a combination of fees and bank balances. Interest that CIGNA incurs for using these lines of credit is negotiated for each individual transaction. Approximately $70 million of CIGNA’s available lines of credit will expire within the next twelve months.

CIGNA issued the following debt securities in 2001:

• $250 million of 7% notes due in 2011, issued in January; and

• $250 million of 6.375% notes due in 2011, issued in October.

As of December 31, 2002, CIGNA had $500 million remaining under an effective shelf registration statement filed with the Securities and Exchange Commission, which may be issued as debt securities, equity securities or both.

61

In March 2002, CIGNA entered into a syndicated bank letter of credit agreement of $650 million in support of an internal reinsurance arrangement associated with obligations of a subsidiary. This reinsurance arrangement was terminated as of July 1, 2002, and no letters of credit are currently issued under this agreement.

Maturities of long-term debt are as follows (in millions): $127 in 2003, none in 2004 and 2005, $100 in 2006, $400 in 2007, and the remainder in years after 2007.

Interest expense was $121 million in 2002, $118 million in 2001 and $104 million in 2000.

Note 11 — Common and Preferred Stock

As of December 31, CIGNA had issued the following shares:

(Shares in thousands)	2002			2001			2000
Common: Par value $0.25
600,000 shares authorized
Outstanding--January 1		141,553			152,005			169,697
Issued for stock option and
other benefit plans		1,309			1,576			1,557
Repurchase of common stock		(3,492	)		(12,028	)		(19,249	)
Outstanding--December 31		139,370			141,553			152,005
Treasury shares		133,317			129,461			116,903
Issued--December 31		272,687			271,014			268,908

In 1997, CIGNA’s Board of Directors adopted a shareholder rights plan, which will expire on August 4, 2007. The rights attach to all outstanding shares of common stock, and will become exercisable if a third party acquires (or announces that it will acquire) 10% or more of CIGNA’s outstanding common stock unless CIGNA’s Board of Directors approves the acquisition. When exercisable, each right entitles its holder to purchase CIGNA securities at a substantial discount or, at the discretion of the Board of Directors, to exchange the rights for CIGNA common stock on a one-for-one basis. In some cases, a right also entitles its holder to purchase securities of an acquirer at a substantial discount. CIGNA’s Board of Directors may authorize the redemption of the rights for $.0033 each before a third party acquires 10% or more of CIGNA’s common stock, and thereafter under certain circumstances.

CIGNA has authorized a total of 25 million shares of $1 par value preferred stock. No shares of preferred stock were outstanding at December 31, 2002, 2001 or 2000.

Note 12 — Shareholders’ Equity and Dividend Restrictions

State insurance departments that regulate certain of CIGNA’s subsidiaries prescribe accounting practices (which differ in some respects from generally accepted accounting principles) to determine statutory net income and surplus. CIGNA’s life insurance and HMO company subsidiaries are regulated by such statutory requirements. The statutory net income for the year ended, and surplus as of, December 31 of CIGNA’s life insurance and HMO subsidiaries were as follows:

(In millions)	2002			2001		2000
Net income (loss)	$	(526	)	$	452	$	868
Surplus	$	3,178		$	3,144	$	3,601

CIGNA’s life insurance and HMO subsidiaries are also subject to regulatory restrictions that limit the amount of annual dividends or other distributions (such as loans or cash advances) insurance companies may extend to their shareholders without prior approval of regulatory authorities. The maximum dividend distribution that CIGNA’s life insurance and HMO subsidiaries may make during 2003 without prior approval is approximately $455 million. The amount of net assets of CIGNA that could not be distributed without prior approval as of December 31, 2002, was approximately $3.2 billion.

Note 13 — Income Taxes

Management believes that CIGNA’s taxable income in future years will be sufficient to realize CIGNA’s net deferred tax assets of $1.3 billion as of December 31, 2002, and $1.0 billion as of December 31, 2001. This determination is based on CIGNA’s earnings history and future expectations.

CIGNA’s deferred tax asset is net of valuation allowances of $149 million as of December 31, 2002, and $91 million as of December 31, 2001. The $58 million increase during 2002 primarily related to operating losses associated with the run-off reinsurance operations. The valuation allowance reflects management’s assessment as to whether certain deferred tax assets will be realizable.

Tax operating loss and capital loss carryforwards in the amount of $209 million and $151 million were available as of December 31, 2002. Operating loss carryforwards in the amount of $33 million were available as of December 31, 2001. Subject to statutory limitations, the operating losses are available to offset taxable income through the year 2022 and the capital losses are available to offset capital gains through the year 2007.

Through 1983, a portion of CIGNA’s life insurance subsidiaries’ statutory income was not subject to current income taxation, but was accumulated in a designated policyholders’ surplus account. Additions to the account were no longer permitted beginning in 1984. CIGNA’s existing account balance of $450 million would result in a $158 million tax liability only if it were distributed or treated as distributed to shareholders as defined by the Internal Revenue Code. CIGNA has not provided taxes on this amount because management believes it is remote that conditions requiring taxation will be met.

CIGNA’s federal income tax returns are routinely audited by the Internal Revenue Service. In management’s opinion, adequate tax liabilities have been established for all years.

62

Deferred income tax assets and liabilities as of December 31 were as follows:

(In millions)	2002			2001
Deferred tax assets
Employee and retiree benefit plans	$	908		$	539
Investments, net		343			368
Other insurance and contractholder
liabilities		227			245
Deferred gain on sales of businesses		155			180
Policy acquisition expenses		120			138
Loss carryforwards		126			11
Bad debt expense		28			23
Other		28			--
Deferred tax assets before valuation
allowance		1,935			1,504
Valuation allowance for deferred tax
assets		(149	)		(91	)
Deferred tax assets, net of
valuation allowance		1,786			1,413
Deferred tax liabilities
Depreciation and amortization		239			248
Unrealized appreciation on
investments		290			132
Total deferred tax liabilities		529			380
Net deferred income tax assets	$	1,257		$	1,033

As of December 31, 2002, current income taxes receivable was $219 million and was included in premiums, accounts and notes receivable in the consolidated balance sheet. Current income taxes payable was $215 million as of December 31, 2001 and was included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheet.

The components of income taxes for the year ended December 31 were as follows:

(In millions)	2002			2001			2000
Current taxes (benefits)
U.S. income	$	(167	)	$	274		$	543
Foreign income		11			6			8
State income		25			13			24
		(131	)		293			575
Deferred taxes (benefits)
U.S. income		(38	)		206			(63	)
Foreign income		5			1			(1	)
State income		(8	)		(2	)		(5	)
		(41	)		205			(69	)
Total income taxes (benefits)	$	(172	)	$	498		$	506

Total income taxes (benefits) for the year ended December 31 were different from the amount computed using the nominal federal income tax rate of 35% for the following reasons:

(In millions)	2002			2001			2000
Tax expense (benefit) at
nominal rate	$	(199	)	$	514		$	520
Tax-exempt interest income		(25	)		(25	)		(24	)
Dividends received deduction		(17	)		(16	)		(17	)
Amortization of goodwill		--			15			15
State income tax (net of
federal income tax benefit)		12			7			12
Change in valuation allowance		58			--			(1	)
Other		(1	)		3			1
Total income taxes (benefits)	$	(172	)	$	498		$	506

Note 14 — Pension and Other Postretirement Benefit Plans

A. Pension and Other Postretirement Benefit Plans

CIGNA and certain of its subsidiaries provide pension, health care and life insurance benefits to eligible retired employees, spouses and other eligible dependents through various plans.

The following table summarizes the obligations and assets related to these plans as of, and for the year ended, December 31:

	Pension Benefits							Other Postretirement Benefits
(In millions)	2002			2001			2002			2001
Change in benefit
obligation
Benefit obligation,
January 1	$	2,932		$	2,756		$	506		$	524
Service cost		101			91			4			3
Interest cost		235			196			36			36
(Gain) loss from
past experience		437			113			53			(16	)
Benefits paid from
plan assets		(184	)		(169	)		(2	)		(7	)
Benefits paid--other		(94	)		(32	)		(39	)		(34	)
Divestiture		--			(23	)		--			--
Benefit obligation,
December 31		3,427			2,932			558			506
Change in plan
assets
Fair value of plan
assets, January 1		2,500			2,890			37			41
Actual return on
plan assets		(284	)		(208	)		2			3
Benefits paid		(184	)		(169	)		(2	)		(7	)
Divestiture		--			(13	)		--			--
Fair value of plan
assets, December 31		2,032			2,500			37			37
Net benefit
obligation		1,395			432			521			469
Unrecognized net
gains (losses)
from past
experience		(1,260	)		(295	)		47			102
Unrecognized prior
service cost		8			9			152			171
Net amount
recognized in the
balance sheet	$	143		$	146		$	720		$	742
Accrued benefit
liability	$	1,241		$	263		$	720		$	742
Accumulated other
comprehensive
income (after-tax
$714, $76)		(1,098	)		(117	)		--			--
Net amount
recognized in the
balance sheet	$	143		$	146		$	720		$	742

Pensions. CIGNA increased its minimum pension liability in the fourth quarter of 2002, based on the effect of equity market declines on the value of pension plan assets and reduced long-term interest rates, resulting in an after-tax charge to equity of $638 million.

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As of December 31, 2002, all of CIGNA’s pension plans had accumulated benefits exceeding plan assets as a result of the effect of equity market declines on the value of pension plan assets and reduced long-term interest rates. The accumulated benefit obligation for these plans as of that date was $3.3 billion, the fair value of plan assets was $2.0 billion and the projected benefit obligation was $3.4 billion.

As of December 31, 2001, only certain of CIGNA’s pension plans had accumulated benefits which exceeded plan assets. The accumulated benefit obligation for these plans as of that date was $246 million, the fair value of plan assets was $5 million and the projected benefit obligation was $374 million.

CIGNA funds the pension plans at least at the minimum amount required by the Employee Retirement Income Security Act of 1974 (ERISA). Substantially all pension plan assets are invested in the separate accounts of Connecticut General Life Insurance Company (CGLIC) and Life Insurance Company of North America, which are CIGNA subsidiaries, or immediate participation guaranteed investment contracts issued by CGLIC. Plan assets also include 292,500 shares of CIGNA common stock with a fair value of $12 million at December 31, 2002, and $27 million at December 31, 2001.

Components of net pension cost, for the year ended December 31 were as follows:

(In millions)	2002			2001			2000
Service cost	$	101		$	91		$	80
Interest cost		235			196			196
Expected return on plan
assets		(258	)		(232	)		(224	)
Amortization of:
Net loss from past
experience		14			14			4
Prior service cost		(1	)		1			1
SFAS 87 transition asset		--			(1	)		(9	)
Net pension cost	$	91		$	69		$	48

Other postretirement benefits. Unfunded retiree health benefit plans had accumulated benefit obligations of $416 million at December 31, 2002, and $368 million at December 31, 2001. At the end of 2002, retiree life insurance plans with accumulated benefit obligations of $142 million were partially funded with plan assets of $37 million, compared with accumulated benefit obligations of $138 million, partially funded with plan assets of $37 million, at the end of 2001. These plan assets were invested in the general account of CGLIC.

Components of net other postretirement benefit cost, for the year ended December 31 were as follows:

(In millions)	2002			2001			2000
Service cost	$	4		$	3		$	3
Interest cost		36			36			39
Expected return on plan
assets		(2	)		(2	)		(3	)
Amortization of:
Net gain from past
experience		(3	)		(4	)		(4	)
Prior service cost		(16	)		(16	)		(16	)
Net other postretirement
benefit cost	$	19		$	17		$	19

In 2002, a gain of $2 million after-tax ($3 million pre-tax) was reported as part of the fourth quarter 2002 restructuring program to realign the health care business. See also Note 5 for further discussion.

The estimated rate of future increases in the per capita cost of health care benefits was 12%, decreasing to 5% over seven years. This estimate reflects CIGNA’s current claim experience and management’s estimate that rates of growth will decline in the future. A 1% increase or decrease in the estimated rate would change 2002 reported amounts as follows:

(In millions)	Increase		Decrease
Effect on total service and
interest cost	$	1	$	(1	)
Effect on postretirement
benefit obligation	$	24	$	(22	)

Assumptions for pension and other postretirement plans. Management determined the projected pension benefit obligation and the accumulated other postretirement benefit obligation based on the following weighted average assumptions at December 31:

(In millions)	2002			2001			2000
Discount rate		6.75	%		7.25	%		7.5	%
Expected return on plan
assets:
Projected pension benefit
obligation		7.5	%		9	%		9	%
Accumulated other
postretirement benefit
obligation		7	%		7	%		7	%
Expected rate of
compensation increase:
Projected pension benefit
obligation		3.6	%		5.3	%		5.2	%
Accumulated other
postretirement benefit
obligation		3	%		4.5	%		4.5	%

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B. 401(k) Plans

CIGNA sponsors several 401(k) plans in which CIGNA matches a portion of employees’ pre-tax contributions. Participants may invest in a fund that invests in CIGNA common stock, several diversified stock funds, a bond fund and a fixed-income fund.

CIGNA may elect to increase its matching contributions if CIGNA’s annual performance meets certain targets. A substantial amount of CIGNA’s matching contributions are invested in CIGNA common stock. CIGNA’s expense for these plans was $47 million for 2002, $50 million for 2001 and $47 million for 2000.

Note 15 — Employee Incentive Plans

The People Resources Committee of the Board of Directors awards stock options and restricted stock to certain employees. Other authorized types of stock-based awards, which have been used to a very limited extent, include common stock issued instead of cash compensation and stock appreciation rights issued with stock options. Dividend equivalent rights are also authorized, but have not been issued.

CIGNA had the following number of shares of common stock available for award at December 31: 13.4 million in 2002, 16.3 million in 2001 and 17.1 million in 2000.

Stock options. CIGNA awards options to purchase CIGNA common stock at the market price of the stock on the grant date. Options vest over periods ranging from one to five years and expire no later than 10 years after the grant date.

When senior executives use shares of CIGNA common stock in lieu of cash to exercise outstanding options, CIGNA issues replacement options equal to the number of shares used. Like ordinary options, replacement options are exercisable at the market price of CIGNA common stock on their grant date. Replacement options vest six months after the grant date and expire on the expiration date of the original option.

The table below shows the status of, and changes in, common stock options during the last three years:

(Options in thousands)	2002					2001					2000
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding--January 1		13,089		$	84.98		11,856		$	75.34		10,763		$	68.37
Granted		4,121		$	94.30		3,474		$	107.81		4,890		$	82.84
Exercised		(1,702	)	$	70.19		(1,681	)	$	64.65		(3,257	)	$	63.03
Expired or canceled		(1,154	)	$	93.67		(560	)	$	83.45		(540	)	$	78.62
Outstanding--December 31		14,354		$	88.71		13,089		$	84.98		11,856		$	75.34
Options exercisable at year-end		7,954		$	85.31		6,041		$	79.26		4,037		$	70.42

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The following table summarizes information for outstanding common stock options at December 31, 2002:

	Range of Exercise Prices
(Options in thousands)	$ 20.81 to $ 49.99		$ 50.00 to $ 89.99		$ 90.00 to $130.63
Options outstanding		397		5,740		8,217
Weighted average remaining
contractual life (years)		1.8		5.8		7.1
Weighted average exercise
price	$	44.54	$	73.39	$	101.54
Options exercisable		397		3,943		3,614
Weighted average exercise
price	$	44.54	$	72.48	$	103.78

The weighted average fair value of options granted under employee incentive plans was $22.13 for 2002, $22.34 for 2001 and $19.35 for 2000, using the Black-Scholes option-pricing model and the following assumptions:

	2002	2001	2000
Dividend yield	1.5%	1.2%	1.5%
Expected volatility	29.4%	24.2%	26.2%
Risk-free interest rate	3.6%	5.0%	6.3%
Expected option life	3.5 years	3.0 years	3.0 years

Restricted stock. CIGNA makes restricted stock grants with vesting periods ranging from three to five years. Recipients are entitled to receive dividends and to vote during the vesting period, but forfeit their awards if their employment terminates before the vesting date. Grants of restricted shares of CIGNA common stock were as follows:

(Shares in thousands)	2002		2001		2000
Shares granted		358		358		405
Weighted average fair value
per share	$	99.26	$	108.44	$	76.29

At the end of 2002, approximately 2,200 employees held 1.0 million restricted shares.

Note 16 — Earnings (Loss) Per Share

Basic and diluted earnings (loss) per share (EPS) for income (loss) from continuing operations are computed as follows for the year ended December 31:

(In millions, except per share amounts)	Basic			Effect of Dilution			Diluted
2002
Loss from continuing
operations	$	(397	)	$	--		$	(397	)
Shares (in thousands):
Weighted average		140,517			--			140,517
Options and restricted stock
grants*					--			--
Total shares		140,517			--			140,517
Loss per share	$	(2.83	)	$	--		$	(2.83	)
2001
Income from continuing
operations	$	971		$	--		$	971
Shares (in thousands):
Weighted average		147,892			--			147,892
Options and restricted stock
grants					2,144			2,144
Total shares		147,892			2,144			150,036
EPS	$	6.57		$	(0.10	)	$	6.47
EPS from continuing
operations adjusted to
exclude goodwill
amortization in 2001 (Note 2)	$	6.89		$	(0.10	)	$	6.79
2000
Income from continuing
operations	$	981		$	--		$	981
Shares (in thousands):
Weighted average		159,810			--			159,810
Options and restricted stock
grants					2,575			2,575
Total shares		159,810			2,575			162,385
EPS	$	6.14		$	(0.10	)	$	6.04
EPS from continuing
operations adjusted to
exclude goodwill
amortization in 2000 (Note 2)	$	6.44		$	(0.10	)	$	6.34

* Because of the loss from continuing operations for the year ended December 31, 2002, the number of shares used to compute loss per share does not reflect the dilution of approximately 1.4 million shares caused by stock options and restricted stock grants.

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Note 17 — Reinsurance

In the normal course of business, CIGNA’s insurance subsidiaries enter into agreements with other insurance companies to assume and cede reinsurance. Reinsurance is ceded primarily to limit losses from large exposures and to permit recovery of a portion of direct losses. Reinsurance does not relieve the originating insurer of liability. CIGNA evaluates the financial condition of its reinsurers and monitors their concentrations of credit risk.

Individual life and annuity reinsurance. CIGNA had a reinsurance recoverable of $5.6 billion at December 31, 2002 and 2001, from Lincoln National Corporation that arose from the 1998 sale of CIGNA’s individual life insurance and annuity business to Lincoln through an indemnity reinsurance arrangement. See Note 4 for information about this sale.

Unicover and other run-off reinsurance. The Run-off Reinsurance Operations participate in a workers’ compensation reinsurance pool, which ceased accepting new risks in early 1999. This pool was formerly managed by Unicover Managers, Inc. Certain disputes over reinsurance coverage for the pool were resolved by an arbitration ruling issued in October 2002, which was further clarified in January 2003.

The Run-off Reinsurance Operations include other workers’ compensation reinsurance contracts, as well as personal accident reinsurance contracts, including contracts assumed in the London market. CIGNA obtained reinsurance coverage in the London market for a significant portion of the claims under these contracts. Some of these London market retrocessionaires have disputed the validity of their contracts with CIGNA and arbitration over some of these disputes has commenced.

Based on the outcome of the Unicover arbitration in October 2002, as well as a review of other exposures for the run-off reinsurance operations, including an assessment of London market retrocessional disputes and workers’ compensation and personal accident exposures, CIGNA recorded an after-tax charge of $317 million ($408 million pre-tax) in the third quarter of 2002.

The London market retrocessional disputes are not expected to be resolved for some time. In addition, unfavorable claims experience related to workers’ compensation and personal accident exposures is possible and could result in future losses, including losses attributable to the inability to recover amounts from retrocessionaires (either due to disputes with the retrocessionaires or their financial condition).

CIGNA’s reserves for amounts recoverable from retrocessionaires, as well as for reserves for liabilities associated with underlying reinsurance exposures assumed by CIGNA, are considered appropriate as of December 31, 2002, based on current information. However, it is possible that future developments regarding these matters could result in a material adverse effect on CIGNA’s consolidated results of operations, and, in certain situations, could have a material adverse effect on CIGNA’s financial condition.

Other reinsurance. CIGNA could have losses if reinsurers fail to indemnify CIGNA on other reinsurance arrangements, whether because of reinsurer insolvencies or contract disputes. However, management does not expect charges for other unrecoverable reinsurance to have a material adverse effect on CIGNA’s consolidated results of operations, liquidity or financial condition.

Effects of reinsurance. In CIGNA’s consolidated income statements, premiums and fees were net of ceded premiums, and benefits, losses and settlement expenses were net of reinsurance recoveries, in the following amounts:

(In millions)	2002			2001			2000
Premiums and fees
Short-duration contracts:
Direct	$	13,995		$	13,013		$	12,839
Assumed		135			221			452
Ceded		(111	)		(215	)		(215	)
		14,019			13,019			13,076
Long-duration contracts:
Direct		1,694			1,815			2,754
Assumed		461			523			721
Ceded:
Individual life insurance
and annuity business sold		(364	)		(386	)		(461	)
Other		(73	)		(111	)		(228	)
		1,718			1,841			2,786
Total	$	15,737		$	14,860		$	15,862
Reinsurance recoveries
Individual life insurance and
annuity business sold	$	326		$	269		$	308
Other		4			460			261
Total	$	330		$	729		$	569

The effects of reinsurance on written premiums and fees for short-duration contracts were not materially different from the recognized premium and fee amounts shown in the above table.

67

Note 18 —Leases and Rentals

Rental expenses for operating leases, principally for office space, amounted to $159 million in 2002, $152 million in 2001 and $132 million in 2000.

As of December 31, 2002, future net minimum rental payments under non-cancelable operating leases were approximately $616 million, payable as follows (in millions): $141 in 2003, $133 in 2004, $113 in 2005, $75 in 2006, $52 in 2007 and $102 thereafter.

Note 19 — Segment Information

Operating segments generally reflect groups of related products, but the International Life, Health and Employee Benefits segment is based on geography. CIGNA measures the financial results of its segments using operating income (which is defined as net income excluding after-tax realized investment results and excluding the results of discontinued operations). CIGNA’s operations are not materially dependent on one or a few customers, brokers or agents.

CIGNA presents segment information as follows:

Employee Health Care, Life and Disability Benefits, which combines CIGNA’s health care and group insurance segments, offers a range of indemnity group health and managed care products and services through guaranteed cost, experience-rated, administrative services only and minimum premium funding arrangements. This segment also offers group life and disability coverages.

Employee Retirement Benefits and Investment Services provides investment products and professional services primarily to sponsors of qualified pension, profit sharing and retirement savings plans. This segment also provides certain corporate and variable life insurance products.

International Life, Health and Employee Benefits provides life, accident, health and employee benefits (group life, health and pension) coverages and services, primarily outside the United States.

Run-off Reinsurance Operations consists of the sold reinsurance operations (prior to the date of sale) and the run-off reinsurance business, which includes accident, domestic health, international life and health, and specialty life reinsurance businesses. CIGNA has stopped underwriting new reinsurance business.

CIGNA also reports results in two other categories.

Other Operations consist of:

• deferred gains recognized from the 1998 sale of the individual life insurance and annuity business;

• corporate life insurance on which policy loans are outstanding (leveraged corporate life insurance);

• settlement annuity business; and

• certain investment management services initiatives.

Corporate reflects amounts not allocated to segments, such as interest expense on corporate debt, net investment income on unallocated corporate investments, intersegment eliminations and certain corporate overhead expenses.

CIGNA determines operating income (loss) for each segment consistent with the accounting policies for the consolidated financial statements, except that amounts included in Corporate are not allocated to segments. CIGNA allocates other corporate general, administrative and systems expenses on systematic bases. Income taxes are generally computed as if each segment were filing separate income tax returns.

Segment reporting changes. As a result of losses on certain specialty life reinsurance contracts recognized in 2002 (see Note 3), CIGNA placed the run-off reinsurance operations (previously reported in Other Operations) into a separate reporting segment in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” Prior periods have been reclassified to conform to this presentation.

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Summarized segment financial information for the year ended and as of December 31 was as follows:

(In millions)	2002			2001			2000
Employee Health Care, Life
and Disability Benefits
Premiums and fees and other
revenues	$	15,261		$	14,145		$	13,540
Net investment income		558			599			604
Segment revenues	$	15,819		$	14,744		$	14,144
Income taxes	$	286		$	390		$	412
Operating income	$	579		$	730		$	756
Assets under management:
Invested assets	$	8,352		$	8,366		$	8,350
Separate account assets		1,250			1,840			1,943
Total	$	9,602		$	10,206		$	10,293
Employee Retirement Benefits
and Investment Services
Premiums and fees and other
revenues	$	336		$	322		$	350
Net investment income		1,649			1,668			1,617
Segment revenues	$	1,985		$	1,990		$	1,967
Income taxes	$	96		$	88		$	103
Operating income	$	231		$	221		$	257
Assets under management:
Invested assets	$	24,698		$	22,678		$	21,246
Separate account assets		28,513			32,399			33,059
Total	$	53,211		$	55,077		$	54,305
International Life, Health
and Employee Benefits
Premiums and fees and other
revenues	$	814		$	936		$	2,046
Net investment income		51			49			148
Segment revenues	$	865		$	985		$	2,194
Income taxes	$	18		$	52		$	26
Equity in net income (loss)
of investees	$	(4	)	$	79		$	(4	)
Operating income	$	31		$	95		$	48
Assets under management:
Invested assets	$	848		$	682		$	3,644
Separate account assets		172			147			134
Total	$	1,020		$	829		$	3,778
Run-off Reinsurance
Operations
Premiums and fees and other
revenues	$	229		$	268		$	377
Net investment income		44			52			63
Segment revenues	$	273		$	320		$	440
Income taxes (benefits)	$	(488	)	$	31		$	(64	)
Operating income (loss)	$	(1,070	)	$	57		$	(119	)
Assets under management:
Invested assets	$	1,356		$	835		$	638
Separate account assets		-			-			-
Total	$	1,356		$	835		$	638
Other Operations
Premiums and fees and other
revenues	$	293		$	333		$	325
Net investment income		409			450			459
Segment revenues	$	702		$	783		$	784
Income taxes	$	37		$	33		$	42
Operating income	$	74		$	76		$	93
Assets under management:
Invested assets	$	5,106		$	5,603		$	5,928
Separate account assets		1,320			1,877			1,880
Total	$	6,426		$	7,480		$	7,808
Corporate
Other revenues and
eliminations	$	(63	)	$	(64	)	$	(59	)
Net investment income		5			24			49
Segment revenues	$	(58	)	$	(40	)	$	(10	)
Income tax benefits	$	(38	)	$	(33	)	$	(16	)
Operating loss	$	(87	)	$	(96	)	$	(58	)
Invested assets	$	2		$	97		$	2
Realized Investment Gains
(Losses)
Realized investment gains
(losses)	$	(238	)	$	(175	)	$	7
Income taxes (benefits)		(83	)		(63	)		3
Realized investment gains
(losses), net of taxes	$	(155	)	$	(112	)	$	4
Total
Premiums and fees and other
revenues	$	16,870		$	15,940		$	16,579
Net investment income		2,716			2,842			2,940
Realized investment gains
(losses)		(238	)		(175	)		7
Total revenues	$	19,348		$	18,607		$	19,526
Income taxes (benefits)	$	(172	)	$	498		$	506
Operating income (loss) from
continuing operations	$	(242	)	$	1,083		$	977
Realized investment gains
(losses), net of taxes		(155	)		(112	)		4
Income (loss) from
continuing operations	$	(397	)	$	971		$	981
Assets under management
Invested assets	$	40,362		$	38,261		$	39,808
Separate account assets		31,255			36,263			37,016
Total	$	71,617		$	74,524		$	76,824

Premiums and fees and other revenues by product type were as follows for the year ended December 31:

(In millions)	2002		2001		2000
Health Maintenance
Organizations	$	6,992	$	6,342	$	6,270
Medical and Dental Indemnity		5,400		4,914		4,396
Group Life		1,595		1,717		1,828
Other		2,883		2,967		4,085
Total	$	16,870	$	15,940	$	16,579

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Note 20 — Foreign Operations

CIGNA provides international life, accident, health and employee benefits insurance coverages on a direct and reinsured basis, primarily through the International Life, Health and Employee Benefits segment in the Pacific region, Latin America and Europe.

Premiums and fees and other revenues by geographic region for the year ended December 31 were as follows:

(In millions)	2002		2001		2000
Domestic	$	16,266	$	15,141	$	14,564
Foreign		604		799		2,015
Total	$	16,870	$	15,940	$	16,579

CIGNA’s aggregate foreign exchange transaction losses and foreign long-lived assets for the year ended and as of December 31, 2002, 2001 and 2000 were not material.

Note 21 — Contingencies

A. Financial Guarantees

CIGNA, through its subsidiaries, is contingently liable for various financial guarantees provided in the ordinary course of business.

Separate account assets are contractholder funds maintained in accounts with specific investment objectives. CIGNA records separate account liabilities equal to separate account assets. In certain cases, CIGNA guarantees a minimum level of benefits for retirement and insurance contracts written in separate accounts. CIGNA establishes an additional liability if management believes that CIGNA will be required to make a payment under these guarantees, which include the following:

• CIGNA guarantees that separate account assets will be sufficient to pay certain retiree or life benefits. The sponsoring employers are primarily responsible for ensuring that assets are sufficient to pay these benefits and are required to maintain assets that exceed a certain percentage of benefit obligations. This percentage varies depending on the asset class within a sponsoring employer’s portfolio (for example, a bond fund would require a lower percentage than a riskier equity fund) and thus will vary as the composition of the portfolio changes. If employers do not maintain the required levels of separate account assets, CIGNA has the right to redirect the management of the related assets to provide for benefit payments. As of December 31, 2002, employers were required to maintain assets that exceed 102% to 128% of benefit obligations. Benefit obligations under these arrangements were $3.3 billion as of December 31, 2002, and $2.4 billion as of December 31, 2001. There were no additional liabilities required for these guarantees as of December 31, 2002 or 2001.

• For certain employer-sponsored savings and retirement plans, CIGNA guarantees that participants will receive the value of their accounts at the time of withdrawal. These guarantees could require payment by CIGNA in the event that a significant number of plan participants withdraw their accounts when the market value of the related separate account assets is less than the plan participant account values at the time of withdrawal. Participant account values under these arrangements are invested primarily in fixed income investments and were $1.7 billion as of December 31, 2002, and $1.8 billion as of December 31, 2001. There were no additional liabilities required for these guarantees as of December 31, 2002 or 2001.

• CIGNA guarantees a minimum level of earnings (based on investment, mortality and retirement experience) for a certain group annuity contract. If the actual investment return is less than the minimum guaranteed level, CIGNA is required to fund the difference. The guaranteed benefit obligation was $313 million as of December 31, 2002, and $334 million as of December 31, 2001. CIGNA had additional liabilities for this guarantee of $15 million as of December 31, 2002, and $14 million as of December 31, 2001.

CIGNA does not expect that these guarantees will have a material adverse effect on CIGNA’s consolidated results of operations, liquidity or financial condition.

The management fee that CIGNA charges to separate accounts includes a guarantee fee. These fees are recognized in income as earned.

As of December 31, 2002 and 2001, CIGNA guaranteed $106 million of construction loans related to investments in certain real estate joint ventures. These loans are secured by the joint ventures’ real estate properties with fair value in excess of the loan amounts. The loans mature at various dates from 2003 to 2007, including extension options. CIGNA would be required to repay the construction loans if permanent financing could not be obtained. CIGNA has recourse to other owners for 3% of any amounts paid under these guarantees. There were no liabilities required for these guarantees as of December 31, 2002 or 2001.

As of December 31, 2002 and 2001, CIGNA guaranteed $42 million of principal for industrial revenue bonds that are payable in 2007 and also guaranteed $8 million of aggregate interest payable periodically up to maturity. These bonds are secured by mortgages on properties and other assets held by real estate partnerships. An event of default under these bonds will not cause the principal or interest payments to be due immediately, but CIGNA would be required to make principal or interest payments under the original terms of the bonds. CIGNA has recourse to partners for 43% of any amounts paid under these guarantees. There were no liabilities required for these guarantees as of December 31, 2002 or 2001.

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At December 31, 2002, CIGNA guaranteed a shortfall of up to $49 million in the market value of leased equipment at the end of the lease. CIGNA had such guarantees for leased equipment of $21 million at December 31, 2001. Guarantees of $21 million expire in 2006 and $28 million expire in 2012.

B. Specialty Life Reinsurance Contracts

The Run-off Reinsurance Operations include certain specialty life reinsurance contracts that guarantee minimum death benefits based on unfavorable changes in variable annuity account values. In 2002, CIGNA recognized an after-tax charge of $720 million ($1.1 billion pre-tax) to strengthen reserves related to these contracts and the adoption of a program to substantially reduce equity market risks related to these contracts. See Note 3 for further information.

CIGNA has also written reinsurance contracts with issuers of variable annuity contracts that provide annuitants with certain guarantees related to minimum income benefits. When annuitants elect to receive these minimum income benefits, CIGNA may be required to make payments based on changes in underlying mutual fund values and interest rates. CIGNA has purchased reinsurance from third parties, which covers 80% of the exposures of these contracts. CIGNA estimates the fair value of the assets and liabilities associated with these contracts using assumptions as to equity market returns, volatility of the underlying equity and bond mutual fund investments, interest rates, mortality, annuity election rates and policy surrenders.

In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which requires disclosure of maximum potential undiscounted future payments for guarantees, even if the likelihood of such payment is remote. In accordance with this requirement, the maximum potential undiscounted payments that CIGNA would make for guarantees related to minimum income benefits under the following hypothetical assumptions, which CIGNA believes unlikely to occur:

• no annuitants surrendered their accounts, and

• all annuitants lived to elect their benefit, and

• all annuitants elected to receive their benefit on the first available date (beginning in 2004 through 2014), and

• all underlying mutual fund investment values remained at the December 31, 2002 value of $2.7 billion, with no future returns,

would aggregate $2.7 billion, gross of reinsurance. CIGNA has reinsurance for 80% of this amount. CIGNA expects the amount of actual payments to be significantly less than this hypothetical undiscounted aggregate amount.

As of December 31, 2002, CIGNA had liabilities of $95 million related to these contracts and amounts recoverable from reinsurers of $76 million. CIGNA has an additional liability of $44 million associated with the cost of reinsurance. Management believes the current assumptions and other considerations used to estimate reserves for these liabilities are appropriate. See Note 7(G) for further information.

C. Regulatory and Industry Developments

CIGNA’s businesses are subject to a changing social, economic, legal, legislative and regulatory environment. Some current issues that may affect CIGNA’s businesses include:

• initiatives to increase health care regulation;

• efforts to expand tort liability of health plans;

• class action lawsuits targeting health care companies, including CIGNA;

• initiatives to restrict insurance pricing and the application of underwriting standards; and

• efforts to revise federal tax laws, including proposals to change the federal tax treatment of dividends and of savings vehicles currently offered as employee benefits.

Health care regulation. Federal and state legislatures, administrative agencies and courts continue efforts to increase regulation of the health care industry and change its operational practices. Regulatory and operational changes could have an adverse effect on CIGNA’s health care operations if they reduce marketplace competition and innovation or result in increased medical or administrative costs without improving the quality of care. Debate at the federal level over “managed care reform” and “patients’ bill of rights” legislation, focusing on questions regarding liability, is expected to continue.

Privacy regulations under the Health Insurance Portability and Accountability Act (HIPAA) of 1996 cover all aspects of the health care delivery system, and address the use and disclosure of individually identifiable health care information. Compliance with the privacy regulations is required by April 2003. In addition to the privacy regulations, HIPAA establishes national electronic transaction standards, which apply to health insurers, providers and other covered entities. They are intended to improve the efficiency and effectiveness of the nation’s health care system by encouraging the widespread use of electronic data interchange. CIGNA must implement these standards by October 2003.

71

Regulations issued in February 2003 set standards for the security of electronic health information, and must be implemented by CIGNA by April 2005. CIGNA has implemented certain security measures and planned others in anticipation of these rules. Other proposed HIPAA regulations include standards for the assignment of a unique national identifier for each health plan and provider and requirements for a unique national identifier for employer groups. CIGNA has commenced significant systems enhancements, training and administrative efforts to satisfy these requirements. Incremental technology and business-related expenses associated with CIGNA’s compliance efforts were approximately $20 million after-tax in 2002.

Other possible regulatory changes that could have an adverse effect on CIGNA’s health care operations include:

• additional mandated benefits or services that increase costs without improving the quality of care;

• narrowing of the Employee Retirement Income Security Act of 1974 (ERISA) preemption of state laws;

• changes in ERISA regulations resulting in increased administrative burdens and costs;

• additional restrictions on the use of prescription drug formularies;

• additional privacy legislation and regulations that interfere with the proper use of medical information for research, coordination of medical care and disease management;

• additional rules establishing the time periods for payment of health care provider claims that vary from state to state; and

• legislation that would exempt independent physicians from antitrust laws.

The health care industry is under increasing scrutiny by various state and federal government agencies and could be subject to government efforts to bring criminal actions in circumstances that could previously have given rise only to civil or administrative proceedings.

Tax benefits for corporate life insurance. In 1996, Congress passed legislation implementing a three-year phase-out period for tax deductibility of policy loan interest for most leveraged corporate life insurance products. In 2001, the Internal Revenue Service (IRS) implemented an initiative for leveraged corporate life insurance plans purchased after June 20, 1986, that permits policyholders to settle tax disputes related to these plans. Management expects that some customers will accept the IRS settlement offer and surrender their policies in 2003. As a result, management expects revenues and operating income associated with these products to decline. In 2002, revenues of $221 million and operating income of $32 million were from products affected by this legislation.

Statutory accounting principles. In 1998, the NAIC adopted standardized statutory accounting principles. States in which CIGNA’s insurance subsidiaries are domiciled have adopted these principles, effective as of January 1, 2001. The implementation of these principles did not materially impact the ability of CIGNA’s insurance companies to make dividend payments (or other distributions) to CIGNA Corporation or to meet obligations under insurance policies.

Insurance-related assessments. Many states maintain funds to pay for the operating expenses of insurance regulatory agencies and pay the obligations of insolvent insurance companies. Regulators finance these funds by imposing assessments against insurance companies operating in the state. In some states, insurance companies can recover a portion of these assessments through reduced premium taxes.

CIGNA’s insurance and HMO subsidiaries’ have recorded assets and liabilities for insolvency fund and other insurance-related assessments that are not material.

D. Litigation and Other Legal Matters

CIGNA and several health care industry competitors were named as defendants in federal and state purported class action lawsuits. A Florida federal court has certified a class of health care providers who allege violations under the Racketeer Influenced and Corrupt Organizations Act and ERISA. CIGNA and the other defendants have appealed that decision. The Florida federal court denied class certification to health plan subscribers, and the plaintiffs have not filed an appeal of that decision.

An Illinois state court certified a class action lawsuit against CIGNA by health care providers alleging breach of contract and seeking increased reimbursements. This state claim was removed to federal court in Illinois, where a settlement agreement between the parties was filed on November 26, 2002. If approved, the agreement will encompass most of the claims brought on behalf of health care providers asserted in other state and federal jurisdictions. On February 21, 2003, the Judicial Panel for Multidistrict Litigation ordered the Illinois case to be transferred to the Florida federal court, which will decide whether the settlement should be approved. In connection with this matter, CIGNA recognized a charge of $50 million after-tax ($77 million pre-tax) in the fourth quarter of 2002 for expected costs associated with health care provider class action litigation. As this matter has not been resolved, adjustments to this amount in future periods are possible.

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In 2002, CIGNA recognized a charge for the result of an arbitration ruling related to reinsurance (retrocessional) coverage of a workers’ compensation reinsurance pool. This charge also included a review of CIGNA’s exposures for the run-off reinsurance operations, including an assessment of London market retrocessional disputes and exposures. The underlying London market retrocessional disputes are not expected to be resolved for some time. CIGNA’s reserve balance is based on a current assessment of these matters, the outcomes of which could result in adjustments to CIGNA’s reserve. See also page 67 for further discussion.

The U.S. Attorney’s Office for the Eastern District of Pennsylvania is investigating compliance with federal laws in connection with pharmaceutical companies’ marketing practices and their impact on prices paid by the government to pharmaceutical companies for products under federal health programs. As part of this investigation, CIGNA is responding to subpoenas concerning contractual relationships between pharmaceutical companies and CIGNA’s health care operations.

In the fourth quarter of 2002, several purported class action lawsuits as well as two shareholder derivative complaints nominally on behalf of CIGNA were filed in federal court in the Eastern District of Pennsylvania against CIGNA and certain of its senior officers and directors alleging securities law violations and breaches of fiduciary duty. Another purported class action lawsuit has been filed against CIGNA and certain officers, also in the Eastern District of Pennsylvania, by an individual who seeks to represent a class of participants in the CIGNA 401(k) Plan who allegedly suffered losses on investments in CIGNA stock from May 2, 2001 to the present, asserting violations of ERISA. In addition, in the fourth quarter of 2002, the Securities and Exchange Commission notified CIGNA that it has opened an informal inquiry into matters relating to CIGNA.

The Department of Justice and Office of Inspector General of the Department of Health and Human Services investigated a subsidiary of CIGNA, Lovelace Health Systems, Inc., (Lovelace) regarding Medicare cost reporting practices for the years 1990 through 1999. In 2002, CIGNA increased reserves for this matter by $9 million after-tax ($14 million pre-tax). This matter was resolved in December 2002, by a settlement agreement between the parties. CIGNA sold its Lovelace subsidiary on January 15, 2003.

In the fourth quarter of 2002, a Connecticut federal court certified a class action lawsuit against CIGNA and the CIGNA Pension Plan. The plaintiffs are participants in the Plan who earned certain Plan benefits prior to 1998. The plaintiffs allege, among other things, that the Plan violated ERISA by impermissibly conditioning certain post-1997 benefit accruals on the amount of pre-1998 benefit accruals, and that these conditions are not adequately disclosed to Plan participants.

CIGNA is routinely involved in numerous lawsuits and other legal matters arising, for the most part, in the ordinary course of the business of administering and insuring employee benefit programs. An increasing number of claims are being made for substantial non-economic, extra-contractual or punitive damages. The outcome of litigation and other legal matters is always uncertain, and outcomes that are not justified by the evidence can occur. CIGNA believes that it has valid defenses to the legal matters pending against it and is defending itself vigorously. Nevertheless, it is possible that resolution of one or more of the legal matters currently pending or threatened could result in losses material to CIGNA’s consolidated results of operations, liquidity or financial condition.

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Report of Management

CIGNA’s management is responsible for the consolidated financial statements and all other information presented in this Annual Report. The financial statements have been prepared in conformity with generally accepted accounting principles, determined by management to be appropriate, and include amounts based on management’s informed estimates and judgments. Financial information presented elsewhere in this Annual Report is consistent with the financial statements. The appropriateness of data underlying such financial information is monitored through internal accounting controls, internal auditors, independent accountants, and the Board of Directors acting through an Audit Committee.

CIGNA maintains a system of internal accounting controls designed to reasonably assure the integrity and reliability of financial reporting and to provide reasonable assurance to management and the Board of Directors that assets are safeguarded and that transactions are executed in accordance with management’s authorization and recorded properly. CIGNA implements and enforces internal accounting controls by selecting and training qualified personnel, by appropriately segregating responsibilities, and by communicating written policies and procedures broadly throughout the company.

In its corporate policy addressing business ethics, CIGNA states its intention to achieve the highest level of legal and ethical standards in the conduct of its business activities. Management provides employees with a copy of this policy. Signed statements are obtained annually from officers, certain other employees and directors attesting to their review of, and compliance with, CIGNA’s business ethics policy.

The Audit Committee of the Board of Directors reviews and reports to the full Board on the appropriateness of CIGNA’s accounting policies, the adequacy of CIGNA’s financial controls and the reliability of financial information reported to the public. The Committee is composed solely of directors who are not employees of CIGNA. Ongoing Committee activities include reviewing reports of management, internal auditors and the independent accountants regarding accounting policies and practices, audit results and internal accounting controls, and assessing CIGNA’s relationship with its independent accountants, including their independence. The Committee has direct access to the internal auditors and independent accountants and meets with them without management in attendance.

The consolidated financial statements have been audited by CIGNA’s independent accountants, PricewaterhouseCoopers LLP, in accordance with generally accepted auditing standards, and have been reviewed by the Audit Committee of the Board of Directors. PricewaterhouseCoopers LLP’s audit included an evaluation of CIGNA’s internal accounting control structure to the extent necessary to determine the audit procedures required to express an opinion on the consolidated financial statements.

Management reviews recommendations of the internal auditors and independent accountants concerning the system of internal accounting controls, and responds to such recommendations with corrective actions, as appropriate. Management believes that, as of December 31, 2002, the system of internal accounting controls is adequate to provide the reasonable assurances discussed herein and that there are no material deficiencies in the design or operation of the system of internal accounting controls.

Report of Independent Accountants

[PRICEWATERHOUSECOOPERS LOGO]

TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF CIGNA CORPORATION

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income and changes in shareholders’ equity and cash flows present fairly, in all material respects, the financial position of CIGNA Corporation and its subsidiaries (the Company) at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” effective January 1, 2002.

Philadelphia, Pennsylvania
February 6, 2003

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Quarterly Financial Data (unaudited)

        The following unaudited quarterly financial data are presented on a consolidated basis for each of the years ended December 31, 2002 and 2001.

        Quarterly financial results necessarily rely heavily on estimates. This and certain other factors, such as the seasonal nature of portions of the insurance business, suggest the need to exercise caution in drawing specific conclusions from quarterly consolidated results.

(In millions, except per share amounts)	Three Months Ended
	March 31			June 30			Sept. 30			Dec. 31
Consolidated Results
2002
Total revenues	$	4,690		$	4,827		$	5,083		$	4,748
Income (loss) from continuing operations before income  taxes (benefits)		331			326			(1,279	)		53
Net income (loss)		218			214	(1)		(877	)(2)		47	(3)
Net income (loss) per share:
Basic		1.54			1.52			(6.27	)		.34
Diluted		1.52			1.50			(6.27	)		.33
2001
Total revenues	$	4,611		$	4,537		$	4,648		$	4,811
Income from continuing operations before income taxes		417			380			400			272
Net income		276	(4)		252	(5)		270	(6)		191	(7)
Net income per share:
Basic		1.82			1.69			1.83			1.33
Basic - excluding goodwill amortization		1.90			1.77			1.91			1.41
Diluted		1.78			1.66			1.81			1.32
Diluted - excluding goodwill amortization		1.86			1.74			1.89			1.40
Stock and Dividend Data
2002
Price range of common stock --  high	$	101.52		$	111.00		$	98.40		$	74.19
--  low	$	87.76		$	94.85		$	69.20		$	34.15
Dividends declared per common share	$	.33		$	.33		$	.33		$	.33
2001
Price range of common stock --  high	$	134.95		$	110.32		$	102.72		$	94.90
--  low	$	99.30		$	87.76		$	75.50		$	69.86
Dividends declared per common share	$	.32		$	.32		$	.32		$	.32

(1) The second quarter of 2002 includes a $2 million after-tax accelerated gain recognized on the sale of CIGNA's life reinsurance business.

(2) The third quarter of 2002 includes a $720 million after-tax charge to strengthen reserves for certain specialty life reinsurance contracts as well as the impact of a program adopted by CIGNA to reduce equity market risks related to these contracts, a $317 million after-tax charge for Unicover and London reinsurance matters and a $9 million after-tax charge for a Medicare cost reporting matter associated with Lovelace Health Systems Inc., partially offset by a $1 million after-tax accelerated gain recognized on the sale of CIGNA's life reinsurance business.

(3) The fourth quarter of 2002 includes a net $95 million after-tax restructuring charge, a $50 million after-tax charge related to health care provider litigation and an after-tax credit of $2 million reflecting the adjustment of liabilities associated with events of September 11, 2001.

(4) The first quarter of 2001 includes an $8 million after-tax gain on the sale of a partial interest in the Japanese life insurance operation.

(5) The second quarter of 2001 includes a $22 million after-tax accelerated gain recognized on the sale of CIGNA's life reinsurance business.

(6) The third quarter of 2001 includes a $33 million after-tax accelerated gain recognized on the sale of CIGNA's life reinsurance business, which was partially offset by charges of $25 million after-tax related to the events of September 11, 2001.

(7) The fourth quarter of 2001 includes a $62 million after-tax restructuring charge, partially offset by a $27 million after-tax gain on the sale of CIGNA's remaining interest in the Japanese life insurance operation and a $14 million after-tax accelerated gain recognized on the sale of CIGNA's life reinsurance business.

75

Supplementary Financial Information

(In millions)
For the years ended December 31,		2002			2001			2000
Revenues from Continuing Operations
Employee Health Care, Life and Disability Benefits
Premiums and fees:
Managed health and dental	$	6,904		$	6,257		$	6,195
Medical and dental indemnity		5,072			4,563			4,090
Life		1,587			1,698			1,764
Other		773			941			910
Total premiums and fees		14,336			13,459			12,959
Net investment income		558			599			604
Other revenues		925			686			581
Realized investment gains (losses)		(128	)		(78	)		10
Total		15,691			14,666			14,154
Employee Retirement Benefits and Investment Services
Premiums and fees		336			322			350
Net investment income		1,649			1,668			1,617
Realized investment losses		(106	)		(93	)		(1	)
Total		1,879			1,897			1,966
International Life, Health and Employee Benefits
Premiums and fees		811			788			2,042
Net investment income		51			49			148
Other revenues		3			148			4
Realized investment gains (losses)		5			(5	)		--
Total		870			980			2,194
Run-off Reinsurance Operations
Premiums and fees		138			148			365
Net investment income		44			52			63
Other revenues		91			120			12
Realized investment losses		(8	)		(14	)		(4	)
Total		265			306			436
Other Operations
Premiums and fees		116			143			146
Net investment income		409			450			459
Other revenues		177			190			179
Realized investment gains (losses)		(1	)		15			2
Total		701			798			786
Corporate
Net investment income		5			24			49
Other revenues and eliminations		(63	)		(64	)		(59	)
Total		(58	)		(40	)		(10	)
Total Consolidated Revenues from Continuing Operations
Premiums and fees		15,737			14,860			15,862
Net investment income		2,716			2,842			2,940
Other revenues		1,133			1,080			717
Realized investment gains (losses)		(238	)		(175	)		7
Total	$	19,348		$	18,607		$	19,526

76

(In millions)
For the years ended December 31,		2002			2001			2000
Operating Income (Loss)(1)
Employee Health Care, Life and Disability Benefits:
HMO operations	$	365		$	399		$	454
Indemnity operations		214			331			302
Total Employee Health Care, Life and Disability Benefits		579			730			756
Employee Retirement Benefits and Investment Services		231			221			257
International Life, Health and Employee Benefits		31			95			48
Run-off Reinsurance Operations		(1,070	)		57			(119	)
Other Operations		74			76			93
Corporate		(87	)		(96	)		(58	)
Total	$	(242	)	$	1,083		$	977
Income (Loss) from Continuing Operations
Employee Health Care, Life and Disability Benefits	$	495		$	681		$	762
Employee Retirement Benefits and Investment Services		163			160			256
International Life, Health and Employee Benefits		35			92			48
Run-off Reinsurance Operations		(1,076	)		48			(121	)
Other Operations		73			86			94
Corporate		(87	)		(96	)		(58	)
Total	$	(397	)	$	971		$	981
Segment Statistics
Employee Health Care, Life and Disability Benefits
Adjusted premiums and fees	$	37,050		$	33,689		$	30,741
Covered lives (in thousands):
Managed medical		6,750			6,809			7,072
Managed dental		2,559			2,756			2,833
Medical indemnity (estimated)		6,341			6,441			6,142
Dental indemnity		10,458			10,600			10,246
Behavioral care		14,113			13,346			12,172
Pharmacy(2)		9,773			9,356			--
Employee Retirement Benefits and Investment Services
Deposits	$	8,772		$	10,149		$	9,942
Assets under management: (3)
Defined contribution	$	28,062		$	29,853		$	30,620
Defined benefit		18,547			18,690			18,370
Corporate life insurance		4,281			3,943			3,725
Other, including guaranteed investment contracts		2,867			2,820			2,439
Total	$	53,757		$	55,306		$	55,154

(1) Operating income (loss) is defined as net income (loss) excluding after-tax realized investment results and excluding the results of discontinued operations.

(2) Not available for 2000.

(3) Assets under management include investment advisory accounts.

77

EX-21

Exhibit 21     

SUBSIDIARIES OF THE REGISTRANT

        Listed below are subsidiaries of CIGNA Corporation as of December 31, 2002 with their jurisdictions of organization shown in parentheses. Those subsidiaries not listed would not, in the aggregate, constitute a "significant subsidiary" of CIGNA Corporation, as that term is defined in Rule 1-02(w) of Regulation S-X.

CIGNA Holdings, Inc. (Delaware)

I. Connecticut General Corporation (Connecticut)

A. CIGNA Bank &Trust Company, FSB

B. CIGNA Dental Health, Inc. (Florida)

(1) CIGNA Dental Health of California, Inc. (California)

(2) CIGNA Dental Health of Colorado, Inc. (Colorado)

(3) CIGNA Dental Health of Delaware, Inc. (Delaware)

(4) CIGNA Dental Health of Florida, Inc. (Florida)

(5) CIGNA Dental Health of Kansas, Inc. (Kansas)

(6) CIGNA Dental Health of Kentucky, Inc. (Kentucky)

(7) CIGNA Dental Health of Maryland, Inc. (Delaware)

(8) CIGNA Dental Health of Missouri, inc. (Missouri)

(9) CIGNA Dental Health of New Jersey, Inc. (New Jersey)

(10) CIGNA Dental Health of New Mexico, Inc. (New Mexico)

(11) CIGNA Dental Health of North Carolina, Inc. (North Carolina)

(12) CIGNA Dental Health of Ohio, Inc. (Ohio)

(13) CIGNA Dental Health of Pennsylvania, Inc. (Pennsylvania)

(14) CIGNA Dental Health of Texas, Inc. (Texas)

(15) CIGNA Dental Health of Virginia, Inc. (Virginia)

(16) CIGNA Dental Health Plan of Arizona, Inc. (Arizona)

C. CIGNA Financial Services, Inc. (Delaware)

D. CIGNA Health Corporation (Delaware)

(1)  Healthsource, Inc. (New Hampshire)

(a)   Healthsource Health Plans, Inc. (North Carolina)

(i)     CIGNA HealthCare of North Carolina, Inc. (North Carolina)

(b) Healthsource Indiana, Inc. (New Hampshire)

(i) CIGNA HealthCare of Indiana, Inc. (Indiana)

(c) CIGNA Insurance Group, Inc. (New Hampshire)

(d) CIGNA HealthCare of Maine, Inc. (Maine)

(e) Healthsource Management, Inc. (New Hampshire)

(i) CIGNA HealthCare of New York, Inc. (New York)

(ii) CIGNA HealthCare of Tennessee, Inc. (Tennessee)

(f) CIGNA HealthCare of Massachusetts, Inc. (Massachusetts)

(g) CIGNA HealthCare of New Hampshire, Inc. (New Hampshire)

(h) Healthsource South, Inc. (New Hampshire)

(i) CIGNA HealthCare of Texas, Inc. (Texas)

(ii) CIGNA HealthCare of Georgia, Inc. (Georgia)

(i) Physicians’ Health Systems, Inc. (South Carolina)

(i) CIGNA Insurance Services Company (South Carolina)

(ii) CIGNA HealthCare of South Carolina, Inc. (South Carolina)

(j) CIGNA HealthCare Mid-Atlantic, Inc. (Maryland)

(k) CIGNA HealthCare of Arizona, Inc. (Arizona)

(i) CIGNA Community Choice, Inc. (Arizona)

(l) CIGNA HealthCare of California, Inc. (California)

(m) CIGNA HealthCare of Colorado, Inc. (Colorado)

(n) CIGNA HealthCare of Connecticut, Inc. (Connecticut)

(o) CIGNA HealthCare of Delaware, Inc. (Delaware)

(p) CIGNA HealthCare of Florida, Inc. (Florida)

(q) CIGNA HealthCare of Illinois, Inc. (Delaware) (99.60% with balance owned by non-affiliate)

(r) CIGNA HealthCare of Louisiana, Inc. (Louisiana)

(s) CIGNA HealthCare of New Jersey, Inc. (New Jersey)

(t) CIGNA HealthCare of Ohio, Inc. (Ohio)

(u) CIGNA HealthCare of Pennsylvania, Inc. (Pennsylvania)

(v) CIGNA HealthCare of St. Louis, Inc. (Missouri)

(w) CIGNA HealthCare of Utah, Inc. (Utah)

(x) CIGNA HealthCare of Virginia, Inc. (Virginia)

(z) Lovelace Health Systems, Inc. (New Mexico) (Sold on 1/15/03)

(aa) Temple Insurance Company Limited (Bermuda)

E. CIGNA Behavioral Health, Inc. (Minnesota)

F. CIGNA Life Insurance Company of Canada (Canada)

G. CIGNA Life Insurance Company of New York (New York)

H. Connecticut General Life Insurance Company (Connecticut)

(1) CIGNA Life Insurance Company (Connecticut)

I. Global Portfolio Strategies, Inc. (Connecticut)

J. International Rehabilitation Associates, Inc. d/b/a Intracorp (Delaware)

K. Life Insurance Company of North America (Pennsylvania)

(1) Linatex, Inc. (Delaware)

II. CIGNA Global Holdings, Inc. (Delaware)

A. CIGNA Saude, Ltda. (Brazil) (99.9% with balance owned by affiliate)

B. CIGNA Brazil Holdings, Inc. (Delaware)

(1) CIGNA Brasil Participacoes Ltda. (Brazil)

(a) CIGNA Servicos Ltda. (Brazil) (43.9% with balance owned by affiliate)

(b) CIGNA Compania de Seguros S.A. (Brazil)

C. CIGNA Global Reinsurance Company, Ltd. (Bermuda)

(1) CIGNA Holdings Overseas, Inc. (Delaware)

(a) CIGNA Argentina Compania de Seguros S.A. (Argentina)

(b) CIGNA European Services (UK) Limited (United Kingdom)

(c) CIGNA International Marketing Australia Limited (Australia)

(d) CIGNA Life Insurance Company of Europe S.A.- N.V. (Belgium)

(i) CIGNA Europe Insurance Company S.A.-N.V. (Belgium)

(e) CIGNA Life Insurance Company of New Zealand Limited (New Zealand)

(f) Empresa Guatemalteca CIGNA de Seguros, Sociedad Anonima (Guatemala) (97.4% with balance owned by non-affiliates)

(g) CIGNA Seguradora S.A. (Brazil) (60% with balance owned by affiliate)

(h) Inversiones CIGNA Limitada (Chile)

(i) CIGNA Asistencia Administrativa Limitada (Chile)

(ii) CIGNA Compania de Seguros de Vida (Chile) S.A. (Chile) (98.6% with balance owned by non-affiliates)

(i) CIGNA Seguros S.A. (Mexico)

(2) CIGNA Worldwide Insurance Company (Delaware)

(a) PT. Asuransi CIGNA (Indonesia) (80% with balance owned by non-affiliate)

D. CIGNA HealthCare Management Company (India) Private Limited (India)

E. CIGNA International Corporation (Delaware)

(1) CIGNA Eastern Europe Sp. z o.o. (Poland)

F. CIGNA International Services, Inc. (Delaware)

G. CIGNA Servicios Administrativos, S.A. de C.V. (Mexico)

H. CIGNA Stu S.A. (Poland) (7.5% with balanced owned by non-affiliates)

I. Philippine HealthCare Providers, Inc. (Philippines) (30% with balance owned by non-affiliates)

J. Planes de Salud Integral, S.A. de C.V. (Mexico) (77% with balance owned by non-affiliate)

K. Sompo Japan CIGNA Securities Co., Ltd. (Japan) (50% with balance owned by non-affiliate)

III. CIGNA Investment Group, Inc. (Delaware)

A. CIGNA International Finance Inc. (Delaware)

(1) CIGNA International Investment Advisors, Ltd. (Delaware)

(a) CIGNA Fund Managers Limited (Bermuda)

(b) CIGNA International Investment Advisors Limitada (Chile) (99.5% with balance owned by affiliate)

(c) CIGNA International Investment Advisors K.K. (Japan)

B. CIGNA Investments, Inc. (Delaware)

C. TimesSquare Capital Management, Inc. (Delaware)

(1) CIGNA Financial Futures, Inc. (Delaware)

IV. CIGNA Intellectual Property, Inc. (Delaware)

EX-23

Exhibit 23

CONSENT OF INDEPENDENT ACCOUNTANTS

        We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-41011) and Form S-8 (No. 33-44371, No. 33-51791, No. 33-60053, No. 333-22391, No. 333-31903, No. 333-64207 and No. 333-90785) of CIGNA Corporation of our report dated February 6, 2003 relating to the financial statements, which appears in the 2002 Annual Report to Shareholders of CIGNA Corporation, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated February 6, 2003 relating to the Financial Statement Schedules, which appears in this Form 10-K.

/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 28, 2003

EX-24

Exhibit 24.1

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and TIMOTHY J. GIFFORD, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i) CIGNA's Annual Report on Form 10-K and all amendments thereto (collectively, "CIGNA's Form 10-K");

(ii) any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207 and 333-90785);

(iii) all amendments to CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

        Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2004.

        IN WITNESS WHEREOF, the undersigned has executed this document as of the 26th day of February, 2003

/s/ Robert H. Campbell

Robert H. Campbell

Exhibit 24.1

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and TIMOTHY J. GIFFORD, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i) CIGNA's Annual Report on Form 10-K and all amendments thereto (collectively, "CIGNA's Form 10-K");

(ii) any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207 and 333-90785);

(iii) all amendments to CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

        Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2004.

        IN WITNESS WHEREOF, the undersigned has executed this document as of the 26th day of February, 2003.

/s/ H. Edward Hanway 

H. Edward Hanway

Exhibit 24.1

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and TIMOTHY J. GIFFORD, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i) CIGNA's Annual Report on Form 10-K and all amendments thereto (collectively, "CIGNA's Form 10-K");

(ii) any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207 and 333-90785);

(iii) all amendments to CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

        Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2004.

        IN WITNESS WHEREOF, the undersigned has executed this document as of the 26th day of February, 2003.

/s/ Fred Hassan

Fred Hassan

Exhibit 24.1

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and TIMOTHY J. GIFFORD, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i) CIGNA's Annual Report on Form 10-K and all amendments thereto (collectively, "CIGNA's Form 10-K");

        (ii) any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207 and 333-90785);

        (iii) all amendments to CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

        (B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

        Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2004.

        IN WITNESS WHEREOF, the undersigned has executed this document as of the 26th day of February, 2003.

/s/ Peter N. Larson

Peter N. Larson

Exhibit 24.1

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and TIMOTHY J. GIFFORD, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i) CIGNA's Annual Report on Form 10-K and all amendments thereto (collectively, "CIGNA's Form 10-K");

(ii) any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207 and 333-90785);

(iii) all amendments to CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

        Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2004.

        IN WITNESS WHEREOF, the undersigned has executed this document as of the 26th day of February, 2003.

/s/ Joseph M. Magliochetti

Joseph M. Magliochetti

Exhibit 24.1

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and TIMOTHY J. GIFFORD, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i) CIGNA's Annual Report on Form 10-K and all amendments thereto (collectively, "CIGNA's Form 10-K");

(ii) any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207 and 333-90785);

(iii) all amendments to CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

        Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2004.

        IN WITNESS WHEREOF, the undersigned has executed this document as of the 26th day of February, 2003.

/s/ Joseph Neubauer

Joseph Neubauer

Exhibit 24.1

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and TIMOTHY J. GIFFORD, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i) CIGNA's Annual Report on Form 10-K and all amendments thereto (collectively, "CIGNA's Form 10-K");

(ii) any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207 and 333-90785);

(iii) all amendments to CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

        Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2004.

        IN WITNESS WHEREOF, the undersigned has executed this document as of the 26th day of February, 2003.

/s/ Charles R. Shoemate

Charles R. Shoemate

Exhibit 24.1

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and TIMOTHY J. GIFFORD, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i) CIGNA's Annual Report on Form 10-K and all amendments thereto (collectively, "CIGNA's Form 10-K");

(ii) any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207 and 333-90785);

(iii) all amendments to CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

        Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2004.

        IN WITNESS WHEREOF, the undersigned has executed this document as of the 26th day of February, 2003.

/s/ Louis W. Sullivan, M.D.

Louis W. Sullivan, M.D.

Exhibit 24.1

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and TIMOTHY J. GIFFORD, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i) CIGNA's Annual Report on Form 10-K and all amendments thereto (collectively, "CIGNA's Form 10-K");

(ii) any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207 and 333-90785);

(iii) all amendments to CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

        Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2004.

        IN WITNESS WHEREOF, the undersigned has executed this document as of the 26th day of February, 2003.

/s/ Harold A. Wagner

Harold A. Wagner

Exhibit 24.1

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and TIMOTHY J. GIFFORD, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i) CIGNA's Annual Report on Form 10-K and all amendments thereto (collectively, "CIGNA's Form 10-K");

(ii) any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207 and 333-90785);

(iii) all amendments to CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

        Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2004.

        IN WITNESS WHEREOF, the undersigned has executed this document as of the 26th day of February, 2003.

/s/ Carol Cox Wait

Carol Cox Wait

Exhibit 24.1

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, a director of CIGNA Corporation, a Delaware corporation (“CIGNA”), hereby makes, designates, constitutes and appoints CAROL J. WARD and TIMOTHY J. GIFFORD, and each of them (with full power to act without the other), as the undersigned’s true and lawful attorneys-in-fact and agents, with full power and authority to act in any and all capacities for and in the name, place and stead of the undersigned (A) in connection with the filing with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, of:

(i) CIGNA's Annual Report on Form 10-K and all amendments thereto (collectively, "CIGNA's Form 10-K");

(ii) any and all registration statements pertaining to employee benefit or director compensation plans of CIGNA or its subsidiaries, and all amendments thereto, including, without limitation, amendments to CIGNA’s registration statements on Form S-8 (Registration Numbers 33-44371, 33-51791, 33-60053, 333-22391, 333-31903, 333-64207 and 333-90785);

(iii) all amendments to CIGNA’s registration statements on Form S-3 (Registration Number 333-41011) relating to $500 million of debt securities, Preferred Stock and Common Stock; and

(B) in connection with the preparation, delivery and filing of any and all registrations, amendments, qualifications or notifications under the applicable securities laws of any and all states and other jurisdictions with respect to securities of CIGNA, of whatever class or series, offered, sold, issued, distributed, placed or resold by CIGNA, any of its subsidiaries, or any other person or entity.

        Such attorneys-in-fact and agents, or any of them, are also hereby granted full power and authority, on behalf of and in the name, place and stead of the undersigned, to execute and deliver all such registration statements, registrations, amendments, qualifications and notifications, and CIGNA’s Form 10-K, to execute and deliver any and all such other documents, and to take further action as they, or any of them, deem appropriate. The powers and authorities granted herein to such attorneys-in-fact and agents, and each of them, also include the full right, power and authority to effect necessary or appropriate substitutions or revocations. The undersigned hereby ratifies, confirms, and adopts, as his own act and deed, all action lawfully taken by such attorneys-in-fact and agents, or any of them, or by their respective substitutes, pursuant to the powers and authorities herein granted. This Power of Attorney expires by its terms and shall be of no further force and effect on May 15, 2004.

        IN WITNESS WHEREOF, the undersigned has executed this document as of the 19th day of February, 2003.

/s/ Marilyn Ware

Marilyn Ware

EX-24

Exhibit 24.2

Certified to be a true and correct copy of the resolutions adopted by the Board of Directors of CIGNA Corporation at a meeting held on February 26, 2003, a quorum being present, and such resolutions are still in full force and effect as of this date of certification, not having been amended, modified or rescinded since the date of their adoption.

      RESOLVED, That the Officers of the Corporation, and each of them, are hereby authorized to sign the Form 10-K in the name and on behalf of and as attorneys for the Corporation and each of its Directors and Officers.

      RESOLVED, That each Officer and Director of the Corporation who may be required to execute (whether on behalf of the Corporation or as an Officer or Director thereof) the Form 10-K, is hereby authorized to execute and deliver a power of attorney appointing such person or persons named therein as true and lawful attorneys and agents to execute in the name, place and stead (in any such capacity) of any such Officer or Director said Form 10-K and to file any such power of attorney together with the Form 10-K with the Securities and Exchange Commission.

Date: February 28, 2003
	/s/ Carol J. Ward
	Carol J. Ward

EX-99

EXHIBIT 99.1

Certification of Chief Executive Officer of
CIGNA Corporation pursuant to 18 U.S.C. Section 1350

I certify that, to the best of my knowledge and belief, the Annual Report on Form 10-K of CIGNA Corporation for the fiscal year ended December 31, 2002:

(1) complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and

(2)  the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of CIGNA Corporation.

/s/ H. Edward Hanway

H. Edward Hanway

Chief Executive Officer

February 28, 2003

EX-99

EXHIBIT 99.2

Certification of Chief Financial Officer of
CIGNA Corporation pursuant to 18 U.S.C. Section 1350

I certify that, to the best of my knowledge and belief, the Annual Report on Form 10-K of CIGNA Corporation for the fiscal year ended December 31, 2002:

(1) complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and

(2)  the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of CIGNA Corporation.

/s/ Michael W. Bell

Michael W. Bell

Chief Financial Officer

February 28, 2003